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Central bank analyses keys to slowing economy

Oct 31. 2019
 Don Nakornthab, senior director of the bank’s Economic and Policy Department.
Don Nakornthab, senior director of the bank’s Economic and Policy Department.
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By The Nation

The Bank of Thailand blames the sluggish global economy primarily for continued deceleration of the national economy in September and the overall third quarter.

It announced on Thursday (October 31) that the value of merchandise exports continues to contract, as it has among Thailand’s trading partners.


Manufacturing production and private investment indicators deteriorated. Private-consumption indicators expanded at a pace similar to the previous month, though public spending rebounded from capital expenditures. 

The tourism sector also continued to expand, thanks chiefly to an increase in the number of Chinese and Indian tourists, said the central bank.

The value of merchandise exports dropped by 1.5 per cent from the same period last year. Excluding gold, their value continued to contract for the 11th consecutive month at 3.3 percent. 

This the bank blamed on slow economies among trading partners, a continued downturn in the electronic cycle and the contraction of global crude oil prices. 

The value of exports expanded in some categories, including automotive and auto parts, agro-manufacturing products and electrical appliances, due to the low base effect and the benefits of substituting exports to the US and China, as well as the relocation of production bases to Thailand, said Don Nakornthab, senior director of the bank’s Economic and Policy Department.

Private-investment indicators continued to deteriorate from the same period last year. Investment in machinery and equipment continued to decrease from imports of capital goods, domestic machinery sales and the number of motor vehicles newly registered for investment. 

Don said this partly indicated that businesses had sufficient production capacity to accommodate future demand. 

Meanwhile, investment in construction declined in almost every aspect, consistent with subdued construction and real estate activities, he said.

Private-consumption indicators moderately expanded at a similar pace compared with the previous month, even though the government launched economic stimulus measures this month to supply purchasing power. 

Spending on services and semi-durable goods grew at a faster pace, offsetting softer growth of spending on non-durable goods and further contraction in spending on durable goods due to lower domestic vehicle sales. 

Softened spending was in line with weakening fundamental factors, from continued contraction in non-farm income, lower consumer confidence and financial institutions’ tightening of credit standards for auto-leasing loans after credit quality deteriorated. 

Manufacturing production consistently contracted following softer domestic and external demand.

Public spending, excluding transfers, slightly rebounded due to the central government’s capital expenditures for transportation projects. However, current expenditures fell from purchases on goods and services. Also, state enterprises’ capital expenditures contracted from the disbursement of the Mass Rapid Transit Authority of Thailand and PTT Public Co Ltd, Don noted.

The value of merchandise imports contracted by 4.5 per cent from the same period last year. Excluding gold, the value of merchandise imports declined 3.5 per cent due to the contraction of imports of raw materials and intermediate goods, particularly electronic parts, consistent with lower production and exports, and crude oil which contracted in both price and volume partly due to an oil refinery shut-down for maintenance, and a drop in imports of capital goods excluding aircraft, ships, floating structures and locomotive, particularly in telecommunication equipment and machinery and electric generating sets, in line with private investment indicators. 

Nonetheless, imports of consumer goods rebounded, partly due to the low base effect, he said.

The number of foreign tourist arrivals accelerated to 10.1 percent compared with the same period last year. This was driven by 1) the low base effect from the tour boat incident in Phuket; 2) the exemption of the visa on arrival fee, encouraging more visitors from China, India, and Taiwan; and 3) the political unrest in Hong Kong, persuading some tourists to shift their destination to Thailand. Moreover, tourists from other Asian countries continued to grow such as Laos, Japan, and South Korea, he said.

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