Thailand: Subdued spending expected in 2H22

  • Most industry chiefs believe private consumption in the 2H22 is expected to remain flat, limited by pressure from high energy prices and the prolonged pandemic.
  • The Federation of Thai Industries (FTI) expects investment and consumption to hit a downward slope in 2H22, following a short-term increase in May 22.
  • Kriengkrai Thiennukul, chairman of the FTI, attributed the sluggish outlook to the prolonged Russia-Ukraine war, which is pressuring global oil prices, concern over new Covid subvariant outbreaks and the US Federal Reserve’s decision to significantly increase its benchmark interest rate.
  • The FTI is also worried Covid-19 will keep causing China to resort to lockdown measures under its zero-Covid policy to contain the spread of the highly transmissible virus.
  • Given these economic uncertainties, consumption and investment cannot avoid being affected, said Mr Kriengkrai.
  • The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) expects exports in 2022 to expand by 5-7%, an increase from a range of 3-5% in its previous forecast.
  • GDP growth is estimated in a range of 2.75-3.5%, a slight change from the 2.5-4% predicted earlier.
  • Whether the economy will continue its revival will be determined by inflation, which is expected to stand at 5-7%, up from 3.5-5.5%, according to the JSCCIB.
  • Amonthep Chawla, head of research and wealth advisory at CIMB Thai Bank (CIMBT), said private consumption in 2H22 is expected to continue recovering based on the country’s reopening, resulting in spending by both international and local travellers as well as other renewed economic activities.
  • The rebounding export sector should increase income and purchasing power for those in related manufacturing sectors, he said.
  • However, the private consumption recovery will be milder as accelerating inflation will dampen the spending mood, while the economic rebound has been limited to the tourism and export sectors, said Mr Amonthep.
  • Although farmers’ incomes have increased, production costs for fertiliser have accelerated, which could affect the sector’s real net profit.
  • All these factors could soften the purchasing power of low-income earners, while rising household debt continues to pressure consumption, he said.
  • This indicates private consumption will be mainly driven by those in the middle- and high-income segments, Mr Amonthep said.
  • Price pressures will persist into 3Q22, the Commerce Ministry said after headline inflation hit an almost 14-year high in Jun 22.
  • The Trade Policy and Strategy Office reported headline inflation, gauged by the consumer price index, rose 7.66% year-on-year from Jun 21, accelerating from 7.1% in May 22 and 4.7% in Apr 22.
  • A source at the Finance Ministry who requested anonymity said real private consumption in 2022 has continued to improve and could expand 4.3% y/y with 0.3% growth in 2021 and contraction of 1% in 2020.
  • Private consumption is expected to expand 4.7% in 2H22, driven by revenue from the service sector following the country’s reopening.
  • According to the BOT, the economy has continued to rebound, reflected by better signals from economic data in May 22 despite a sharp spike in the inflation rate.
  • Private consumption in May 22 after seasonal adjustment rose by 0.6% m/m in most spending categories.
  • This improvement reflected waning concerns over the Omicron outbreak, which led to positive development in various economic activities, said the bank.
  • Yet consumer confidence continued to decline, a sign of concern over rising living costs.

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