A study on the impacts of the property market and the financial sector on the Thai economy
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2011
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2554
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eng
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xv, 187 leaves : ill.; 30 cm.
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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National Institute of Development Administration. Library and Information Center
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Piamchan Doungmanee (2011). A study on the impacts of the property market and the financial sector on the Thai economy. Retrieved from: http://repository.nida.ac.th/handle/662723737/594.
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A study on the impacts of the property market and the financial sector on the Thai economy
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Abstract
Even though the property and financial sectors do not occupy the highest proportion of the Gross Domestic Product (GDP), the difficulties that emerge from these sectors could lead to the most severe impacts on the entire Thai economy. This study thereby aims to analyse the impacts of the property market and the financial sector on the Thai economy, as well as to evaluate the impacts of government policy—the Thai Kem Keng program—on these sectors. The three models, including the Input-Output model, the Social Accounting Matrix (SAM) model, and the Financial SAM model, are adopted in the analysis to measure such linkages and impacts. The database used in the study is the 2004 SAM and 2004 Financial SAM for Thailand. The study shows that collateral—a durable asset used to guarantee a loan—is a very important factor that creates a nexus between the property market and the financial sector, especially the commercial banking sector, which this study focused on, and the problems in these sectors, thereby spreading to the entire economy. The construction sector in Thailand has very strong pull effects (backward linkage effects), while the real estate sector shows stronger push effects (forward linkage effects) than pull effects (backward linkage effects). The commercial banking sector also plays a very important role in the Thai economy, as evidenced by its highest direct push effect. The degree of dependency of the property sector on the commercial banking sector is much larger than the reverse. The results of the study imply that crises in the property sector lead to banking crises, and finally economic crises. In addition, the paper finds that the economic impacts of the construction sector, the real estate sector, and the commercial banking sector that are computed by the Financial SAM model are 25%, 27%, and 20% higher than those computed by the SAM model, respectively, because the Financial SAM includes the induced effects of the financial side. Therefore, without using the Financial SAM, the result could mislead the interpretation of the degree impacts of these sectors on the overall economy. Currently, the Thai government is implementing the Thai Kem Keng Program a 3-year 1.56 trillion Baht program, which focuses mainly on spurring the economy. The program allocates 73%, the highest share of all sectors, of its budget to the property industry. The effectiveness of the policy can be reflected in the increase in economic growth and good distribution of household income. The study finds that the average GDP growth, caused by the Thai Kem Keng policy and computed by the Financial SAM model, is 2.8% greater than the that computed by the SAM model. The lowest income group receives the greatest benefits from government investment. The result shows that their income increase computed by the Financial SAM model is 13.5% greater than that from the SAM model. Although the commercial banking sector does not receive direct financial support from the Thai Kem Keng Program, the sector is also benefitted. This depicts the interdependence between the commercial banking sector and other sectors. It can be concluded that the result processed by the Financial SAM model shows a greater impact than the conventional SAM model. Therefore, without using the Financial SAM model, the result indicates a lower degree of impact of the property and commercial banking sectors on the entire Thai economy. The contribution of this study consists in that fact that using the Financial SAM model will help in the accurate analysis and measurement of the problems that emerge from the linkage between the property and commercial banking sectors, and spread over the entire Thai economy, better than the traditional SAM model.
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Thesis (Ph.D. (Economics))--National Institute of Development Administration, 2011