Industries sentiment increases for fourth consecutive month in August

The Federation of Thai Industries (FTI) said on Wednesday that the Thai Industries Sentiment Index (TISI) has increased for the fourth consecutive month in August.

The index rose from 75.9 in April to 78.4 in May, 80.0 in June, 82.5 in July, then to the latest of 84.0 index points in August.

Supant Mongkolsuthree, the FTI’s chairman, said returning economic activities and increased demand have led to the month-on-month expansion of productions within the manufacturing sector.

The expansion was led by production growth in key industries such as cars, electrical appliances, machinery, food, and construction materials. 

However, the TISI is still below 100, indicating that the industries sentiment is still low as consumers are still wary of spending during the economic downturn as the country is heading into a recession. 

At the same time, SMEs are suffering from a shortage of liquidity brought about by the lack of access to capitals being offered by the government’s soft loan policies, while banks are now more concerned with rising NPLs. 

The fragile global economy, rising uncertainty over political stability, and strong baht also add to the negative sentiments but some manufacturers can find a positive push from the low oil prices.

The forward-looking index for the next three months has increased from 93.0 in July to 94.5 in August, showing improved sentiment over future revenue.

However, many manufacturers are still wary of the possibility of a second wave of coronavirus in the country and the ongoing situations abroad, Supant said.

The FTI’s chairman urged for the government to come up with more stimulus measures to stimulate domestic demand and provide more liquidity for SMEs in the second half of 2020. 

The FTI continues to urge the government to extend the loan payment holiday for all SMEs, which is due to end in October, by two more years until 2022. They also want the government to provide a rebate on corporate tax for spending on outing activities to promote domestic tourism.

Supant told Thai Enquirer, however, that the private sector’s biggest concern right now is that many SMEs are facing foreclosure as they are having a serious cash-flow problem, especially those within the tourism industry and its supply chain.

“We welcome the measures to stimulate domestic consumption but what we are most concerned with right now are SMEs that are having difficulty in paying back their loans,” he said.

Supant is referring to the government’s cash handout measures worth 51 billion baht that are expected to be introduced to the cabinet in 2021.

“What SMEs really need is the extension of the loan payment holiday by another two years,” he added.

He said that if the government does not want to extend the loan payment holiday for both principal and interest payments then the FTI suggests that businesses pay only 10 per cent of the interest payment but not the principal.

Veerathai Santiprabhob, the outgoing Bank of Thailand’s governor, said in July that the central bank will not extend the suspension of principal and interest payments for SME loans when it is expected to expire at the end of October.

“If the BOT still insists that loan payment holidays cannot be extended then SMEs will certainly face a crisis period once they have to start paying back their loan again… many of them will have to close down permanently and NPLs will rise even more,” Supant added.

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