The Bank of Thailand is presently refining its GDP assessment for the forthcoming September convening, raising caution about the sluggish pace of exports and a lesser than anticipated influx in tourism. An additional concern on the table is the prospective influence of the digital cash handout initiative by Pheu Thai.
As per Sakkapop Panyanukul who heads the macroeconomic division of BOT, the overall economic landscape and the financial climate in July evinced signs of revival, influenced by an increase in local spending due to a rise in consumption and a greater investment by the private sector.
The tourism sector saw an upswing with foreign tourist arrivals touching 2.49 million as compared to 2.24 million in the prior month, a 0.9% increase. The cumulative tourist count this year marks an impressive 15.4 million, predominantly constituted by visitors from Russia, Malaysia, South Korea, and Japan. Nevertheless, despite the swelling numbers, revenue from tourism didn’t register a substantial boost since the majority of visitors were short-term tourists.
Exports, neglecting gold, contracted by -1.8% as compared to the previous month and plummeted by -4.5% relative to the same duration in the previous year. Sectors like electronics, hard drives, and agricultural products faced a decline while the automotive sector noted enhancements across various markets.
Private consumption observed a positive rejig of 1%, with almost all types of goods witnessing improvements. The sectors at the helm of this shift were tourism, hospitality, eateries, and transport. Investments by the private sector saw a rise by 1.4% over the prior month, propelled by construction ventures, industrial estate augmentation, and machinery investments.
Government expenditure, exclusive of transfer payments, increased by 3.6%, primarily driven by a massive 21.7% leap in investment expenditure, which included rural road construction and state enterprise investments. The recovery in the labour market aligns perfectly with consumption. The number of employees shielded by social security increased, while the number of job seekers overall saw a decline. Nonetheless, the number of new job seekers showed a minor increment, warranting further observation.
The inflation rate in July saw a slight increase of 0.38% from June’s 0.23%, principally due to the surge in energy prices and geopolitical events. Base inflation, however, slid from 1.32% to 0.86%.
The Thai baht fortified its position reaching 34.46 Baht per US dollar in July from 34.92 in June, swayed by forecasts of a US Federal Reserve interest rate increase. Subsequently, in August, the Baht displayed a marginal weakening to an average of 35.02 Baht/US dollars, influenced by a strengthened US economy, underperforming Chinese economic indices, and lower than expected Thai economic figures. Yet, the trade-weighted index stayed comparatively stable, synced with the region.
Sakkapop hinted that the Monetary Policy Committee (MPC) assembly on September 27 could bring about revisions in the economic progress forecasts for the ongoing year (projected at 3.6%) and for 2024 (predicted at 3.8%). External factors, chiefly export conditions, will be instrumental. The third quarter of this year may not witness a significant export revival because of base effects, but the fourth quarter could signal a revival in the electronics sector.
While the tourism industry is displaying signs of recovery, there is still a lag in tourist expenditure, given the dominance of short-term tourist arrivals. However, the domestic economy is consistently expanding, fuelled by consumer spending.
Sakkapop also briefed on the digital payment policy – a cash handout of 10,000 Baht propounded by the government to stimulate the economy which is expected to cost around 500 billion Baht or about 3% of the GDP. Yet, an in-depth impact analysis on economic growth and inflation is pending as the specifics of the digital cash distribution aren’t clear yet.
He stressed that the economic impact will hinge on the circulation of the funds. If a full rotation leads to a 3% economic expansion, the digital cash handout, given its slower circulation, might have a reduced impact.
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