The Bank of Thailand revealed that the Thai economy in July 2024 will recover, driven by the tourism and service sectors, while also taking care of the baht to prevent excessive volatility that would cause the business sector to be unable to adjust in time.
Ms. Chanawadee Chaianan, Assistant Governor, Corporate Relations Group and Spokesperson of the Bank of Thailand (BOT), announced the economic and financial situation in July. The overall Thai economy improved after slowing down in the previous month, following the recovery of foreign demand. Exports of goods and income from foreign tourists increased, resulting in expansion of industrial production and related services. Private sector investment expanded from the previous month, while private consumption remained stable. However, confidence among business operators and consumers has declined, partly due to concerns about the low economic growth. Government spending expanded from both regular and investment expenditures of the central government, while in
vestment expenditures of state enterprises contracted in line with disbursements for transportation projects.
In terms of economic stability, the general inflation rate increased from the previous month in the fresh food category and the core inflation rate. The fresh food category increased due to the low base effect of the previous year and the increase in fruit prices following the decrease in production. The core inflation rate increased in the processed food category. The energy category inflation rate decreased due to the high base effect of gasoline prices last year. The labor market improved, reflected in the increase in employment in the social security system in both the manufacturing and service sectors. However, the proportion of unemployment claims to the total number of insured persons must be monitored, which has increased. The current account surplus decreased from the trade balance, mainly due to the increase in import value. Meanwhile, the service, income, and transfer balances had deficits
close to the previous month. Overall, business fundraising decreased from the previous month, following fundraising through debt instruments in the energy business group. However, fundraising through the capital market increased from the consumer goods manufacturing business and the petroleum and chemical manufacturing group, along with fundraising through loans that slightly increased from loans in the transportation and construction business groups.
Ms. Chanawadee stated that the baht’s appreciation was due to several factors: 1) the market has increased its expectation of a rate cut by the US Federal Reserve after US economic and inflation figures came out lower than the market expected; 2) the appreciation of the yen after the Bank of Japan raised interest rates higher than the market expected; and 3) pressure from rising gold prices. The BOT is taking care of volatility by ensuring that it does not fluctuate too much and continuously, to the point where the business sector cannot adjust in time. In the
past, the business sector has learned to use more tools to hedge exchange rate risks. At the same time, the BOT also has an FX Ecosystem, which is a measure to help the business sector as well.
The BOT assesses that the economic activity trend will be driven by the tourism and service sectors, while merchandise exports and industrial production will gradually recover. However, some industries will still be pressured by structural factors and high levels of inventory, resulting in fragile business and household income in some groups. In the future, we must monitor 1) the results of accelerated budget disbursements and government measures, 2) the recovery of exports and production, and 3) geopolitical conflicts.
Source: Thai News Agency