Visible but slow pace of economic recovery in third quarter: BOT

The biggest dip has been in export performance and private investment has remained subdued while the recovery of government spending is visible but slower than expected, as only a small part of public investment outlays were disbursed, the central bank said.

Meanwhile, private demand has picked up and played a greater role in the economic expansion led by the apparent recovery in the consumption of non-durable goods. However, high household debt, low farm prices, excess production capacity in many industries have been a constraint to increase consumption of durable goods, especially the demand for automobiles. The service sector has recovered gradually, led mainly by the return of visitors from Asia, especially China.

“Thailand’s economy is recovering but the recovery is slow and it is not apparent in every sector,” said Roong Mallikamas, BOT’s senior director of Macroeconomic and Monetary Policy Department. “Despite the increase in private consumption and the government’s stimulus programmes, there are constraints in many sectors.” 

“The varying pace of recovery in different economic sectors represents the first stage of economic recovery where there are ups and downs. But once the economy finds a foothold, it will be able to expand at a faster rate, similar to the first stage of the US economic recovery,” she added. 

The central bank revealed that exports in September expanded by 2.2 per cent when compared to last year with a value of around US$19.6 billion. However, the first nine months have seen a contraction of 0.7 per cent due to slower demand from major trading partners and the limitation in terms of production, as Thailand is not making the products that are currently in demand. 

In terms of private consumption, she said the increased domestic consumption of non-durable goods is apparent in the third quarter and the consumption of energy and electricity in September has increased by 4.5 per cent and 5.9 per cent respectively when compared to the same period last year. 

However, high household debt, at 83 per cent of the GDP (gross domestic products), and low farm prices that decreased the income of farmers by more than 10 per cent when compared to last year, have been constraints for the consumption of durable goods. They have pulled down the expansion of domestic consumption as a whole, she added.

Roong said government spending in terms of investment in September rose considerably when compared to July and August. But the significant expansion in September still cannot outweigh the poor performance of the first two months of the third quarter. Therefore, government spending in the third quarter as a whole is still less than what the central bank has expected and its growth is flat when compared to the same period last year.

The expansion of private investment in September is flat month on month due to the overall demand, which remain below normal trend. Excess production capacity in many industries also means that many operators still do not see the need to increase their production rate where the industrial capacity utilisation percentage is at 61.1 per cent she said.

Regarding the factors that could help stimulate the economy in the last quarter of this year, Roong said, “We hope that the government investment would progress as soon as possible, as it is still relatively low and the fact that some of the budget is intertwined.”