Rise in TRA index points to success of government’s economic policies 

This reflects the effectiveness of the government’s spending policies and measures to accelerate budget disbursement, stimulating grassroots consumption.
Jariya Chirathivat, president of the Thai Retailers Association, said yesterday that the association’s index separated products into three categories – durable, semi-durable and nondurable. 
The TRA index last year showed a significantly reduced rate of growth in durable goods, while semi-durable goods grew and nondurable goods had a slightly increased rate of growth.

Growth trends
Durable goods: The growth rate was not high due to the construction and housing sector not growing satisfactorily from 2015-16 as the main factor, along with financial institutions tightening consumer loans. Although home appliances showed some growth, the whole mobile and IT industry grew less than 5 per cent with no new products to stimulate the market, all of which made the durable goods segment expand by only 1.95 per cent in 2016.
Semi-durable goods: This segment saw stable growth, despite tourist arrivals increasing from 29.5 million in 2015 to 32 million in 2016, which did not result in increased spending on semi-durable goods. One important barrier to spending was domestic import taxes on luxury goods remaining high. Fashion, cosmetics and leather goods also showed slower growth. Only sports and health goods grew at high rates because of the health-conscious trend, which supported the semi-durable goods index to maintain growth of 3.5 per cent, the same as 2015.
Nondurable goods: This category showed only little growth because of the impacts from farmers’ incomes continuing to shrink from 2015, serious drought and depressed global commodity prices. Sales growth in the first quarter was not as expected. However, after the drought was over and normal rainfall resumed, farm production started to improve, which, alongside government measures to inject cash into the system and promote growers’ groups, caused the economy to pick up. Farmers’ weak buying power gradually improved to give a trend of increasing sales in the second and third quarters, although there was a slight shrinkage in the fourth quarter. The government’s “Shop for the Country” campaign in December lifted sales of non-durable goods by 3.03 per cent.

Positive factors 
Increased efficiency of the budget-drawing process: Budgets drawn for investment and the investment budgets of state enterprises were not less than 80 per cent, and in those overlapping years, not less than 75 per cent. Infrastructure investment projects have been implemented in transportation, the development of the Eastern Economic Corridor and the special border economic zones.
Increasing mid-year budgets by Bt190 billion: This is expected to show results by the second and third quarters.
Maintaining growth of income from tourism: The implementation of the 2017 strategic plan for the tourism market is expected to lead to 35 million tourist arrivals and income generated of over Bt2.8 million. 
Improvement of farmers’ incomes: Expectations should improve from the recovering drought situation and farm prices returning to a positive direction, especially of staples such as rubber, palm, sugarcane and pineapple.

Risk factors
Household debt: This appears to be stable at a level of 80.2 per cent with a modest effect on household purchasing power, which may cause the consumption of durable and semi-durable goods to slow down.
SMEs’ non-performing loans with financial institutions: NPLs have an increasing trend with the result of shrinking the system’s loan base, reduced investment and increased unemployment.
Increased oil prices: This trend would drive inflation up, which may put pressure on household spending while increasing transportation costs.
Exports and private sector investment: These need to be monitored for changes in line with increased volatility in the global economy. At this point it is necessary to rely mainly on government investment.

Directions
Nondurable goods: These should improve better than other segments as a result of the efficient direction of state budgets to the grassroots and over Bt2 trillion coming into the system.
Durable goods: Despite the government’s acceleration of investment in infrastructure to boost the growth of property, clear growth may not be seen this year. Growth in this sector should remain flat going into 2017.
Semi-durable goods: Fashion, cosmetics and leather goods are still hoping for the effects of government policies to relax import taxes to stimulate tourist spending to grow by over 12 per cent, as well as to relax border trade restrictions, especially tourists coming from neighbouring countries. Domestic consumption should remain flat as people are still mourning for His Majesty King Bhumibol Adulyadej.
Overall: The Retail Index should show slight improvement, with growth expected to be around 3-3.2 per cent.

Stimulus proposals 
Urgently institute confidence-building measures to promote an atmosphere of spending and investment: Measures can include activities to promote tourism in the low season in cooperation with the tourism industry, hotels and the retail industry, which can stimulate spending by both Thais and tourists.
Create confidence among both Thai consumers and foreign tourists: The government can get the Tourism Ministry to announce the Thailand Brand Sale event for a period of three months. This will create an atmosphere to attract tourists and stimulate spending by consumers who still have purchasing power to return to previous levels. Seriously study and consider the matter of reducing import duties on luxury brands: Thailand has the potential to attract tourists with both natural and cultural attractions, as well as global standards of hotels and tourism services. Therefore, to develop Thailand into a comprehensive tourist destination, the government should cut duties on particularly fashions, cosmetics, leather goods and watches, to stimulate spending by foreign tourists.
Launch clear measures to promote border trade: The government can consider relaxing the opening of border posts, increasing the number of border posts and providing greater convenience, including considering a VAT refund for tourists from neighbouring countries arriving by land.
Urgently assist SMEs: Attention should be focused on the problem of poor cashflow or liquidity from increased labour and energy costs. For instance, an SME supplier to an association member might be able to use an invoice received from a retailer as collateral for borrowing from either the government or private banks to improve their cashflow.
Develop online trading: Businesses outside the system should be brought into the system.