Central bank flustered by March indicators
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ECONOMIC indicators in March were weaker than expected, with some contraction in manufacturing production and private investment, reflecting a fragile economic recovery, according to the Bank of Thailand.
However, the central bank expects the economy to recover more strongly this quarter thanks to state investment.
Don Nakornthab, BOT director of macroeconomic policy, said the March figures on consumption and private investment were particularly disappointing. This was one of the reasons behind the Monetary Policy Committee’s interest-rate cut on Wednesday.
“Earlier, the MPC wanted to wait for the actual [economic] figures from the National Economic and Social Development Board. However, when the MPC saw the March figures, most of its members felt it was not necessary to wait for the actual figures, and decided to cut the rate,” he said.
Seasonally adjusted, March exports declined in all sectors, partly blamed on economic slowdowns in China and Asean and the still-fragile recoveries of the economies of Europe and Japan. Prices of products including petroleum, rubber and chemicals also remained low in line with crude-oil prices.
Private investment remained weak, reflecting the Consumer Confidence Index’s 1.9-per-cent contraction year on year, and 0.1-per-cent contraction month on month. Households postponed spending after lower export-oriented income and employment.
Don said lower farm income resulted from declines in the prices of agricultural products. The consistent decrease in consumer confidence, coupled with high household debts and banks’ cautious lending, have reduced spending on non-durable goods, semi-durable goods and services. Spending on durable goods, particularly cars, also remained low.
“Domestic and overseas demand declined, prompting businesses to reduce their production and investment, despite lower borrowing costs after the policy-rate cut. Manufacturing of all products decreased,” Don said.
The Manufacturing Production Index in March shrank 1.8 per cent year on year and 5.6 per cent month on month.
The Private Investment Index contracted 0.5 per cent year on year and month on month because of declines in machinery and equipment investment.
