Thailand’s Economy Shows Signs of Slowdown Despite Tourism Sector’s Resilience

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Thailand, Southeast Asia’s 2nd largest economy, has been showing signs of possible slowing despite the tourism sector pushing forward, as data from the Bank of Thailand (BoT) indicated.

“The Thai domestic economy in September slowed down from the previous month, with tourism remaining a key positive driver. Private consumption indicators decreased by -0.5% MoM SA after a 2Q acceleration. The decline was primarily driven by non-durable goods (-1.0% MoM SA), such as consumer products and fuels,” Pipat Luengnaruemitchai, an economist at Phatra Securities, says.

The central bank, which releases the data of the previous month on the last working day of the preceding month, yesterday released the data for September 2023. Data for September 2023 indicated a further weakening of the Thai economy, with the Capacity Utilization (CapU) showing a marginal improvement to 58% from the CapU for August of 57.9%. The CapU is lower than those seen during the Prayut Chan-o-cha government in 2021 and 2022, and the months of August and September 2023 were among the lowest, as data from the central bank shows.

This means that Thailand’s economy is likely to be among the weakest in the region, with the CapU of the likes of Malaysia at around 80% above the 2019 levels.

The slowdown in the economy is evident from the private sector, who have lately been complaining about falling sales figures and hoping that the 10,000 Baht Digital Wallet stimulus scheme would be implemented.

If the weak CapU was not enough, the data from the BoT showed that private consumption was also slowing.

“Private consumption expanded at a slower rate of +6.3% YoY and declined by -0.5% vs. August. Looking at the details, falls in non-durables (-1.0% MoM, SA) and semi-durables (-0.9% MoM, SA) contributed to a net reduction in consumer spending in Sept, while services spending (+0.7% MoM, SA) remained a bright spot thanks to the continued recovery in the tourism sector,” Methas Rattanasorn, an economist at Tisco Securities, said in a note to clients this morning.

Phatra’s Pipat says that private investment indicators also declined, primarily due to slowdowns in the construction materials index (-4.8% month-on-month seasonally adjusted) and newly registered motor vehicles for investment (-1.5% MoM SA), as well as reduced sales of domestic machinery. This decline was consistent with the 6.1% contraction in the manufacturing production index. Additionally, investment slowed down due to a decrease in construction permits for housing and commercial purposes, indicating an overall weakening trend in the domestic economy.

Bright Spots

Despite the negative factors, economists say that the tourism sector remains a bright spot, with tourism arrivals continuing to remain at decent levels despite being the rainy season (low season).

Foreign tourist arrivals slowed to 2.13 million persons (vs. 2.47 million in August). This was partly attributable to a fall in Chinese visitors (285,000 vs. 355,000 in August).

The dampener in the tourism sector could be witnessed after the shooting at Paragon in October, as many tourists were reportedly canceling their plans to visit after the incident.

Farm income was another bright spot for the economy, as many agricultural products continued to see a rise in their value. Poramet Tongbua, an economist at Bualuang Securities, says that looking to Q4 2023, he expects farm income to continue rising year-on-year (YoY), as higher prices for agricultural commodities (sugar, rubber, and rice) should outweigh the effect of lower YoY livestock prices. The Manufacturing Price Index (MPI) should mark a shallower YoY decline for October, Poramet says.

The rise in agricultural prices helped push up the exports for the 1st time in nearly a year. Export goods remained weak but registered growth for the first time in almost a year (+1% YoY vs. -1.8% the previous month).


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