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Thai economy improved in June: Central bank

Jul 31. 2020
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By The Nation

The Bank of Thailand (BOT) reports that the economy improved in June due to gradual relaxation of lockdown measures that aided resumption of economic activities. As a result, goods exports (excluding gold), private consumption and private investment indicators, and manufacturing production contracted at a lower rate than in May, said the BOT’s latest report on Economic and Monetary Conditions.

Headline inflation remained negative but edged up due to a rise in domestic retail petroleum prices.

Core inflation was slightly negative, consistent with weak domestic demand. The labour market remained vulnerable as jobless claims rose. 

The current account was balanced. 

Meanwhile, public spending expanded both in current and capital expenditures. 

However, the tourism sector continued to contract substantially as foreign tourist arrivals stayed at zero for the third consecutive month due to Thailand’s inbound travel restrictions.

Overall economic stability remained vulnerable, according to the central bank.

The capital and financial accounts posted a surplus in both the asset position – owing to the net sell in debt securities and the withdrawal of deposits abroad by Thai investors – and the liability position, owing to the net buy in debt securities by foreign investors.

The value of goods exports fell by 24.6 per cent in June from the same period last year, slightly higher than the previous month. Excluding gold, however, the rate of contraction fell sharply to 18.4 per cent from 29.0 per cent last month. This was due to improvement in exports in almost all categories. Nevertheless, export values still shrank at a high rate, especially automotive and parts, machinery and equipment, and petroleum-related products, reflecting weakening income of trading partners.

Private consumption indicators contracted at a lower rate compared with the previous month fuelled by consumer spending coupled with government relief measures. However, private consumption indicators still fell sharply in line with weak household income and low consumer confidence. Manufacturing production contracted at a lower rate in almost all industries, consistent with the improvement of exports and private consumption.

Meanwhile, private investment indicators contracted substantially but at a slower pace than the previous month due to higher investment in machinery and equipment from domestic machinery sales, newly registered vehicles, and imports of capital goods. Meanwhile, construction investment contracted at a higher rate on reduced construction material sales. 

The value of merchandise imports contracted by 18.2 per cent from the same period last year, improved from the previous month in all major categories including consumer goods, raw materials and intermediate goods, and capital goods. This was partly due to a low base effect last year.

Public spending, excluding transfers, expanded from the same period last year in both current and capital expenditures. Current expenditure rose slightly from purchases of goods and services. Capital expenditure expanded sharply due mainly to disbursement of government budget for road maintenance. However, state enterprises’ capital expenditure contracted.

The BOT reported that overall economic activity in the second quarter of 2020 substantially contracted as a result of economic disruption from Covid-19 containment measures in Thailand and abroad. External demand contracted sharply in the tourism sector and exports. Consequently, domestic economic activities were affected especially private consumption and private investment indicators as well as manufacturing production. However, public spending expanded and played an important role in supporting the Thai economy. On the stability front, headline inflation was negative mainly from a decline in energy prices, while core inflation was slightly positive. The current account posted a small deficit compared with a large surplus in the previous quarter, attributed to a drop in tourism receipts and seasonal remittance of profits and dividends by foreign businesses operating in Thailand. The capital and financial accounts registered a surplus from the asset and the liability positions.

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