InfoQuest (July 31, 2023) - Ms. Chayawadee Chai-Anan, Deputy Director of Institutional Relations Department at the Bank of Thailand, revealed that the Thai economy marked consistent recovery in June 2023. There is marked progress in the tourism industry with rising numbers of both domestic and foreign tourists, and the product export value, excluding gold, also witnessed an uptick. Industrial products remain stable, in line with the industrial production state, with the significant increase in agricultural product exports taking the spotlight. On the other hand, public consumption and private investment, which surged last month, showed a slowdown. Regular government spending and investment spending experienced a decline.
Economic stability is notable with the general inflation rate undergoing significant adjustments with fresh food, largely due to the prices of cooked meat and fresh vegetables. The core inflation rate has also descended from the relatively high levels of the preceding year. The labor market shows signs of recovery. In the trade balance, a surplus has emerged as export earnings persistently climb. Other deficits, including those related to services, income, and inflows of funds, are on a downtrend, as are the issues of profit drain and product spending from the previous month.
Ms. Chayawadee stated that the number of foreign tourists in June 2023 reached 2.24 million, an uptick from the preceding month, with Malaysia and China contributing significantly due to their long holidays. However, despite robust promotion in the prior month, tourist numbers from regions such as Europe and the Middle East have dwindled.
Product exports saw a 5.9% decrease compared to the same period last year and, excluding gold products, a 4.6% decline. But, if contrasted with June 2023, there was a 2.5% growth, particularly noticeable in agricultural products such as durian exports to China and electronics exports, including hard disk exports to the United States and European countries. With reduced palm oil exports to India, the export value of finished agricultural products has dwindled, as has the export of electrical appliances promoted in the prior month.
Following the closure of some smelters in the previous month, industrial production has stayed stable, while automated industrial rubber production has grown. The steel industry has expanded, coinciding with the reduction in the product's imports from China. However, due to reduced orders from certain trade partners, such as sugar and rubber products, which are crucial industrial products, the value of many bulk commodities has taken a hit.
Meanwhile, the import value of products in June, excluding gold, will fall compared to the previous month. This is specifically reflected in the import of products such as big-ticket products (last month, the import of airplanes and computers were accelerated), raw materials and intermediate products excluding fuel (while steel products have decreased), and public consumption products such as electrical appliances, electric vehicles, and pharmaceutical products. Despite this, imports of natural gas have escalated, leading to an increase in fuel imports.
Compared to the preceding month, the private consumption index has experienced a slight downturn in every product category. This includes the prior push for private car exports, while spending in the service industry has held steady. There has been a boost in household purchasing power, reflected in employment and consumer confidence. Yet, higher living expenses remain a comprehensive factor impacting people's consumption.
Private investment index has also declined compared to the previous month, mainly due to the production equipment, especially after last month's push for the import of big-ticket products, and a decrease in investment in the construction industry. Nevertheless, the area permitted for construction has increased, primarily to foster the development of industries and factories.
Government expenditure (excluding transfers) has dipped compared to the same period last year. Investments by national enterprises in energy and transportation projects have also witnessed a downturn.
Economic stability is evident. The general inflation rate has seen a 0.23% decrease compared to the same month of the preceding year, mainly due to price adjustments for cooked meats and fresh vegetables resulting from more products entering the market. The core inflation rate has decreased by 1.32% compared to the same period last year, largely reflected in the prices of prepared meals and condiments.
The labor market is on a recovery trajectory, as evidenced by the number of people purchasing insurance from the system. Trade balance shows a surplus primarily from declining deficits in service payments, income, and capital inflows, while the issues of profit loss and product spending from the prior month are consistently declining.
With the Renminbi's devaluation and China's economic data falling below expectations, the average exchange rate of the Thai Baht against the U.S. dollar dropped in June. Additionally, internal political instability in Thailand has further weakened the Baht against our trade partners' currencies. Despite this, following the U.S. Federal Reserve's interest rate hike and the market's reduced expectations, along with signs of weakening inflation in the United States, the Baht showed a minor resurgence in July.
The Thai economy exhibited improvements in Q2 2023, primarily in tourism and public consumption.
Ms. Chayawadee conveyed that Thailand's economy in Q2 2023 (April-June) has improved compared to the prior quarter, with a rise in numbers of domestic and foreign tourists boosting the service industry and public consumption. Private enterprises' investment has escalated, as well as investment in new industries, and non-gold product exports (mainly agricultural products). Industrial production, including automobile manufacturing, food, and beverage production, has receded. Government spending has seen a cut due to reductions in daily expenditures by the central government and investments by national enterprises.
Economic stability remains evident. Both the general and core inflation rates have descended compared to the same period last year, primarily due to a decrease in energy inflation. The labor market continues to rebound alongside the economy. The quarter saw a decrease in tourism rebates and a trade surplus in the trade balance.
The tourism industry is pivotal to Thailand's economic development, but three key risk factors warrant close monitoring.
In discussing Thailand's economic trajectory in July 2023 and beyond, Ms. Chayawadee forecasted that with the increase in tourist numbers and the revival of the service industry, Thailand's economic activities will continue to improve in July. However, certain factors that significantly influence the economy in the long run must be closely monitored. These factors comprise: 1. Highly uncertain and volatile global financial markets and economic conditions; 2. The formation and policies of the new government; 3. The impact of high expenditures on impoverished populations.
Looking ahead, the tourism industry remains a potent driver of Thailand's economic development, while exports have dwindled, relating to the economic development trends of our trading partners. Thailand's exports are anticipated to continue contracting in July and will not start to recover until the year-end. At that time, exports of electronic products will expand, and the economic trends of our trade partner countries will also improve.
Source: InfoQuest, by Gasamaporn Jittisampant/Rachda Kongkuntian, translated by Xinhua Silk Road
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