No.43/2013
In August 2013, the Thai economy began to stabilize. Private consumption and investment remained steady, while exports showed a recovery sign resulting from improving global demand. This contributed to a slight increase in manufacturing production from last month. The tourism sector continued to expand robustly.
On the stability side, inflation eased further and the unemployment rate stayed low. The current account and the trade balance recorded a surplus, while the capital account and the balance of payments registered a deficit.
Details of the economic conditions are as follows:
Private consumption stabilized, as reflected by the Private Consumption Index (PCI) which expanded slightly by 0.6 percent year-on-year (yoy). This owed mainly to a pickup in consumption-based VAT collection, although imports of consumer goods and automobile sales contracted. Sales of automobile declined owing to the high base effect of last year, but sales volume became more stable.
Private investment remained steady from last month as well. Nonetheless, when compared to the high base in the same period last year, private investment contracted as reflected by a 4 percent (yoy) decline of the Private Investment Index (PII). The contraction was due mainly to a slowdown in imports of machinery and equipment in electronics and automobile industries, coupled with a decrease in commercial car sales. Construction investment, however, expanded in line with construction areas permitted for both residential and commercial purposes as well as cement sales.
Merchandise exports picked up in tandem with a gradual recovery in global demand. The merchandise export value stood at 19,991 million US dollars, increasing by 2.5 percent (yoy) from a rise in exports of manufacturing products, especially automobile, integrated circuits and parts, petro-chemical products as well as apparels. Nevertheless, exports of fishery and processed agricultural products continued to contract as the outbreak of shrimp disease persisted. Meanwhile, agricultural exports decreased following (1) a decline in rubber exports as orders from China slowed down given high inventory, and (2) a reduction of rice exports due to subdued external demand for Thai rice as a result of the higher price relative to competitors together with an increase in output of major imported countries.
Recovering exports led to an improvement in export-oriented manufacturing production, especially the production of apparels and electrical appliances. At the same time, petroleum and hard disk drive production increased as a result of last year’s low base. Frozen shrimp production, however, continued to be held back by the disease. Overall, the Manufacturing Production Index (MPI) dropped by 3.1 percent (yoy), a smaller contraction compared to the last month’s figure.
The contraction of manufacturing production and investment weighed on merchandise imports, which registered at 17,777 million US dollars, a decline of 2.4 percent (yoy). This was due to lower imports of capital as well as raw material and intermediate goods excluding fuel. Nevertheless, raw material imports for export-oriented industries showed a recovery sign.
Farm income grew by 1 percent (yoy) thanks to positive growth in price. Farm price rose by 4.2 percent on account of higher price of shrimp as a result of a reduction of shrimp supply due to the disease, higher price of livestock due to unfavorable climate, and higher cassava price owing to greater demand for ethanol production. However, rubber and rice prices continued to decline as orders from abroad, especially China in the case of rubber, slowed down. Farm output dropped by 3.1 percent (yoy) led by a decline in rice and shrimp production.
The tourism sector expanded robustly, with 2.5 million foreign tourist arrivals which increased by 28.1 percent compared to last year, thanks to more tourists from China, Malaysia and Russia.
Fiscal spending decelerated given the expedited transfer of subsidy to local administration and non-budgetary funds in the preceding months and the delay in capital expenditure disbursement for irrigation and transportation projects. Meanwhile, government revenue moderated as personal income tax and VAT collections increased while excise tax on car purchases declined. With revenue outpacing expenditure, the government’s cash balance posted a surplus of 17 billion baht.
On the stability front, headline inflation softened to 1.59 percent (yoy) due mainly to a slowdown in energy prices. Core inflation recorded at 0.75 percent (yoy) on the back of limited pass-through of costs to prices of goods and services. This was in line with softened domestic demand. Unemployment remained low. The current account and the trade balance recorded a surplus, while the capital account registered a deficit owing to outflows of foreign portfolio investment. The balance of payments posted a deficit overall.
Bank of Thailand
Contact: Macroeconomic Team
Tel: +66 (0) 2283 5647, +66 (0) 2283 5648
e-mail: [email protected]
Source: Bank of Thailand