Thailand: On the tail end of a patchy recovery – 4 Sep 2017

  • The National Economic and Social Development Board reported that Thailand’s GDP rose by 3.7% y/y in 2Q17 after expanding 3.3% in 1Q17. The rise marked a 17-quarter high, after the 5.2% growth 1Q13. In 1H17, the economy grew by 3.5% y/y.
  • But upon closer inspection, what you find is an unbalanced economic recovery, where unequal wealth distribution persists across all sectors and the anguish endured by the middle class and poor persists.
  • Despite a pickup in commodity prices, households are cautious on spending as they have to allocate their income for debt-servicing and house repairs in light of heavy flooding, resulting in sluggish personal spending, said Amonthep Chawla, head of research at CIMB Thai Bank (CIMBT).
  • Thailand’s household debt rose almost 80% to THB11.5tr at the end of Mar 17 from THB6.41tr at the end of 2010, according to Bank of Thailand data.
  • “The problem of high household debt remains with us, and I think it will remain a drag on consumption for the next few years,” said Mathee Supapongse, the deputy governor overseeing monetary stability at the central bank.
  • Akin to domestic consumption, eyes are fixed on private investment, as it is one of the key indicators suggesting a boom or bust cycle for an economy.
  • Although private investment rebounded considerably in 2Q17, that reality was not reflected in the central bank’s lacklustre business sentiment index, while the manufacturing production index and the capacity utilisation rate remained tepid, said Mr Kampon of Kasikorn Securities.
  • Private investment rose by 3.2% y/y in 2Q17, up from a decline of 1.1% 1Q17, National Economic and Social Development Board (NESDB) data showed.
  • The private sector is not just waiting for Thailand’s general election to occur, but also focusing on continuity in state-level investment policies, such as the special economic zones and mega-infrastructure investment projects by the next government, he said.

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