Consumption falls short of expectation

“It is apparent that the recovery of the economy is not as good as we had expected. Many still hoped that after we were done with the political fighting, the economy would snap back to where it was or a V-shaped recovery, but that did not happen,” Kobsak Pootrakul, an executive vice president of Bangkok Bank, told a seminar organised by the Capital Market Research Institute yesterday.

The economy started looking good after the protests ended. Consumption and confidence were expected to perk up, as everyone believed people had a lot of money to splurge since they had held back on spending during the seven months of political conflict, but it didn’t happen that way, he said.

The economy did not “bounce up” because consumers were under strain of high household debt while the bull stock market only benefited the rich and put nothing into poor people’s pockets.

For example, 40,000 private cars worth about Bt90 billion were sold during the protest period and some 39,000 cars were bought at an average cost of more than Bt2 million, which is the price of a Mercedes-Benz. The motor expo last month also racked up more than Bt30 billion in bookings. 

“The economy of people in the rich segment has ‘bounced up’ since this segment has received the benefits from the performance of the SET Index, which has reached the 1,600 mark this year. And their economy will be even more vibrant when the index hits 1,650 or 1,700,” he said.

The segment that is worrisome is the poor segment. Household debt has doubled from 40 per cent to about 80 per cent in the past decade, while lower prices for crops have sparked an unprecedented crime wave in the South.

“The poor have the highest level of debt, which means that they cannot consume more and there is also uncertainty surrounding their future income, while the people at the middle-income level still have a lot of liabilities to repay and their purchasing power has yet to return because of that,” he said.

Business sentiment has brightened but private investment has yet to increase and has even continued to contract in the past three to four months, he added.

Pakorn Peetathawatchai, executive vice president and head of corporate strategy and finance for the SET, said the capital market has just came out of the correction period and there is extreme volatility from internal and external turbulence.

“The return on investment in the capital market is better this year but there are many uncertainties that are currently surrounding the local and foreign markets,” he said.

There is more clarity in the country’s economic policies but there are doubts over their implementation while external factors such as the Ebola outbreak and geopolitical risks in the Middle East and Europe are all happening at the same time, which adds to market unpredictability.

The divergence of central bank policies around the world is also contributing to the constant changes in capital flows. 

“The 20-per-cent rise in the stock market index means that market correction can always occur and it did, so the market has returned to normal but there are still many uncertainties in the next period that could create instability in the market,especially from external factors.”