Thai economy flat on cautious consumer spending, private investment

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SCB_Park_PlazaThailand’s economy took a slower pace in December 2014 and the fourth quarter of last year, according to the Bank of Thailand (BOT) in its latest official release.

In December, the pace of economic recovery remained slow despite lower cost of living and falling oil prices as consumer spending softened and businesses awaited economic recovery and clarity on government’s infrastructure investment, said the central bank.

The main drivers for the month were merchandise exports, the tourism sector and government spending.

In detail, merchandise exports last December made a gradual recovery. Foreign orders continued to increase mainly from the U.S. whose economy continued to improve. This was countered by soft demand from China as well as declining prices of several oil-related goods such as petroleum, rubber, and chemical products, which caused the value of exports in 2014 to decline slightly from last year.

Merchandise import values declined in December from last month due mainly to crude oil imports, attributed to falling global oil prices and reduced import volume by refineries as they expected lower prices as well as a marked decline in gold imports.

The tourism sector continued to expand as Asian tourists, particularly China and Malaysia, increased substantially during the New Year celebration given their lessening concerns on the political situation. The increase helped offset a drop in the number of tourist arrivals from Russia and Japan, which were hurt by their economic slowdowns and the depreciation of their currencies.

As for private investment, this flattened in December from the previous month as recovery in domestic and foreign demand was still soft and government’s infrastructure investment was at the beginning stage.

“As a result, investment for capacity expansion and construction remained low despite supportive financial conditions,” said the BOT.

Overall manufacturing production rose marginally from the previous month in line with industrial electricity consumption. Export-oriented production to the U.S. expanded especially integrated circuit and electrical appliances, but domestic-oriented production declined with the drop in beer and sugar production.

Farm income contracted considerably compared to the same period last year, stemming from falling prices of rubber and rice. The former resulted from lower orders from major importers China and Malaysia. This was coupled with pressure from declines in global oil prices and the limited impact of declining oil prices on prices of renewable energy crops such as oil palm, sugar cane and cassava.

Economic stability on both domestic and external front was sound. Overall, the balance of payment was in balance and the ratio of international reserves to short-term external debt remained high, said the financial authority.

On overall economic activity in the fourth quarter of 2014, the central bank noted a gradual improvement, mainly driven by merchandise exports, the tourism sector, and faster government disbursement at the beginning of fiscal year, which contributed to recovery in the manufacturing production and the service sectors. Private spending, nevertheless, slowed down from the previous quarter as businesses awaited clear signs of recovery in the economy and government’s infrastructure investment.

Photo: Jarcje