Thursday, October 22, 2020

Thailand’s economy shows improvement as merchandise exports, manufacturing, private investments slowly pick up

Oct 01. 2020
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By The Nation

Thailand’s economy has shown signs of slight improvement in August, held up by lighter contraction in the value of merchandise export, manufacturing and private investment indicator, according to the central bank. 

Even though the Covid-19 outbreak hit the export sector hard, there are signs of recovery. 

The value of export contracted by 8.2 per cent from the same period last year. Excluding gold exports, which came in at a historical high, the value of merchandise export in August showed a contraction of 13.6 per cent, less than the 14.3 per cent contraction in the previous month. 

This was attributed to an improvement in the export of petroleum-related products, automotive and parts and electrical appliances, consistent with gradual recovery of demands in trading partner countries. 

However, agricultural products contracted deeper, especially in terms of fruit exports to China after having grown in the preceding period. Manufacturing production had a softer contraction in almost all categories, aligning with gradual recovery in merchandise exports and domestic spending.

Private investment indicators, meanwhile, marked a lighter contraction in comparison to the previous month, mainly from investment in machinery and equipment.

Private investment index contracted 4.6 per cent year on year, compared to 7.5 per cent contraction in July. This is evidenced by an improvement in the import of capital goods – 13 per cent contraction, up from 24.8 per cent contraction in July. The number of newly registered motor vehicles is aligned with modest recovery in domestic and external demand as well as an upturn in momentum, despite business sentiment being at a low level. Meanwhile, investment in construction expanded at a slightly softer pace, following construction material sales.

The value of merchandise imports contracted by 19.1 per cent from the same period last year, exhibiting a softer contraction in all categories of products compared to the previous month; notably consumer products, capital goods, raw materials and intermediate goods, in line with the improvement in overall economic activities.

Private consumption indicators were still on a recovery path in line with factors supporting consumer purchasing power. This was exhibited by gradual improvement in employment condition, household income and consumer confidence, despite private consumption indicators contracting deeper this month. 

The reversal was led by higher contraction in non-durable goods and services spending after positive effects of special extended holidays last month came to an end. Meanwhile, spending on durable goods continued to contract at a lower rate, partly due to the purchase of new passenger car models entered the market in the previous month, according to the central bank.

The number of foreign tourist arrivals continued to contract severely at 100 per cent from the same period last year. Thailand has had no foreign tourists for five consecutive months as international travel restrictions remain in place. 

Public spending, excluding transfers, had greater expansion attributed by marked expansion in capital expenditures (47 per cent rise year on year in fiscal 2020) from the central government. However, current expenditures contracted slightly (2 per cent) due to purchases of goods and services. Meanwhile, state enterprises’ capital expenditures shrank from disbursement of transportation agencies.

On the overall economic stability, headline inflation recorded a softer negative at 0.5 per cent, on the back of an increase in fresh food and energy prices, while core inflation declined slightly. As for labour market, the unemployment rate came down slightly but the number of workers registered for jobless claims remained high. The current account stands at a $3-billion surplus, up from $1.7 billion in July largely contributed by gold exports. The capital and financial accounts posted a deficit of $400 million, down from $400 million surplus in July owing to the outflow of liabilities, led by the net sell-off of Thai equity securities by foreign investors and the loan repayment by Thai depository financial corporations, the central bank statement added.

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