Mr. Krisada Chinavicharana, Director-General of the Fiscal Policy Office, revealed that, "Thai economy in June and the 2nd quarter of 2014 showed slowing signs from inbound tourists and domestic spending. However, producer and consumer confidences showed improving signs. Exports and public spending became positive and robust economic stability would support Thai economy in the second half of 2014."
Private consumption in Q2/2014 showed stable signs from previous quarter. This was reflected by the real VAT collection in Q2/2014 which expanded by 0.3 percent per year, increasing from previous quarter's contraction at -0.1 percent per year. However, durable goods consumption as reflected by passenger car sales showed lower contraction at -37.7 percent from a year earlier. Consumer Confidence Index in Q2/2014 stood at 61.2 points, increasing from previous level at 59.9 in Q1/2014. This was due to consumers' confidence about Thai economy and improvement in political situation with clearer fiscal policies.
Private investment in Q2/2014 also showed slowing signs, in machinery and construction investment. Private investment indicators of construction sector also showed slowing signs as real estate tax collection in Q2 contracted by -7.6 percent per year, decreasing from last quarter's contraction at -6.6 percent. Besides, the cement sales in Q2/2014 decreased by -3.0 percent per year, but increasing by 0.2 percent from last quarter after seasonal adjustment (q-o-q SA). Private investment indicators of machinery sector also showed slowing signs as reflected by decrease in commercial car sales by -30.6 percent per year.
Public spending accelerated as reflected by the budget disbursement in Q2/2014 (Q3 in FY2014) which recorded at 514.7 billion baht, regarded as an expansion of 6.8 percent from a year earlier, increasing from last quarter's contraction at -5.6 percent per year. Public spending played role in supporting private consumption and investment which continued to contract.
External demand as reflected by Exports in June 2014 became positive. Export value increased by 3.9 percent from last year. For Q2/2014, exports showed slight increase at 0.3 percent per year. Exports to Europe, India, Middle East, Philippines, Taiwan, USA and CLMV expanded, while exports of agricultural product electronics and electrical appliances grew.
Supply-side indicators showed slowing signs in manufacturing and service sectors. For the manufacturing sector, Manufacturing Production Index (MPI) in Q2/2014 contracted by -5.0 percent. The manufacturing sector which contracted included vehicles, jewelry, air-condition and food while radio and television, plastics, leather and electronics contracted. However, Thai Industrial Sentiment Index (TISI) in June 2014 stood at 88.4 points, increasing for the second month, since the political situation improved for the producer's confidence. Also, there was a FIFA World Cup which supported sportswear, food and electrical appliances such as television. Service sector as reflected by the number of inbound tourists was recorded at 5.32 million persons in Q2/2014, or decreased by -12.3 percent from last year. This contraction was owing to inbound tourists from Asia, short-term tourists while European tourist continued to expand. For agricultural production, Agricultural Production Index in Q2/2014 expanded by 4.3 percent from a year earlier due to expansion of livestock since there was an increase in pork and poultry demand and no epidemic of any disease.
Internal stability remained robust with slight pressure on inflation and unemployment while external stability remained strong. Headline inflation in Q2/2014 was at 2.5 percent, due to increasing price in vegetable and livestock from the drought and increasing price of instant foods from increasing LPG price. Meanwhile, core inflation rate was at 1.7 percent. Unemployment rate in Q2/2014 stood at 1.0 percent of total labor force, increasing from last quarter's level at 0.9 percent. Likewise, external economic stability remained robust and resilient to the risk from volatilities in the global economy, as indicated by the high-level of international reserves at the end of June 2014 at 168.2 billion USD, or approximately 2.7 times of short-term external debt.
Source: Fiscal Policy Office / www.fpo.go.th