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Update November 2015

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Update by Natrakorn Paewsoongnern

Economic conditions in the North for June 2015

In a just released press release from the Bank of Thailand, Northern Branch, it was reported that in June 2015 economic conditions in the northern region continued to slowdown from the previous month. Although tourism, government capital expenditure and cross-border exports contributed to drive the northern region economy, private consumption and investment remained weak. Production of second crop rice dropped as a consequence of drought. In addition, manufacturing production decreased on account of falling beverage production after having accelerated in the previous periods, and declining export-oriented electronics production led by weakened electronics exports. Overall economic stability remained sound. Headline inflation rate picked up slightly due to higher prices for fuel and raw food.
Unemployment rate was at low level as falling agricultural employment was offset by rising employment in wholesale and retail trade, and construction industry. At end-May 2015, commercial bank credits and deposits increased moderately from those of the previous month.
Details of the economic conditions are as follows:
The tourism sector expanded well and continued to be a key driver of the northern region economy. Tourism indicators increased, including the number of air passengers, average hotel occupancy rate, average hotel room rate and the amount of value added tax (VAT) collected from hotels and restaurants. In addition, sales of necessity goods was boosted by various factors which included foreign tourist spending, particularly the Chinese, the number of Thais traveling to attend meetings and seminars, and events organized by private and public sectors, encouraged by the government’s economic stimulus measures.
Government capital expenditure continued to expand, increasing significantly by 35.5 percent. Much of the increase was in transportation infrastructure maintenance projects, irrigation projects, and educational institutions and hospitals’ construction projects.
Export value declined slightly by 0.2 percent, attributed by a fall in exports of electronic components due to sluggish economic recovery of major trading partners, and declines in export market shares. However, cross-border exports of consumer products continued to expand, albeit at a slower pace after having accelerated in the previous month. Import value grew by 3.3 percent, mainly from imports of raw materials and intermediate goods for export-oriented manufacturing industries.
Private consumption and investment remained subdued. The Private Consumption Index dropped by 1.0 percent on account of falling consumer durable goods including passenger cars and motorcycles, dampened consumer confidence and financial institutions’ cautious hire-purchase financing. However, consumption of necessity goods increased, boosted partly by tourists spending, while fuel consumption continued to rise.
The Private Investment Index continued to decline, falling by 8.6 percent, largely driven down by weak construction investment as a result of sluggish demand for real estates. This was reflected by falling private investment indicators, including the square meters of construction areas permitted in municipal zones, volume of construction materials sold, imports of machinery and equipment, and the number of registered commercial cars. However, an increase in investment value of BOI’s approved projects may contribute to support new private investment.
Manufacturing and agricultural production decreased. The Manufacturing Production Index fell significantly by 16.8 percent due to declines in both domestic-oriented and export-oriented production. For the domestic domestic-oriented production, alcoholic beverage production dropped after having accelerated in previous periods, at the same time, milled rice production fell as rice seeds supply was affected by drought. For export-oriented production, production of electronics components, ceramics and wooden furniture declined since manufacturers either lost export market shares to competitors or responded slowly to market demand. Export-oriented production of processed vegetables and frozen fruits, however, continued to rise.
Farm income fell by 17.0 percent as both major crop production and price dropped. Major crop production index decreased markedly by 16.7 percent, whereas major crops price index declined only marginally by 0.4 percent. Such marginal decline was supported by gains in prices for second crop rice, pineapples and lychee after their production decreased as a consequence of drought. Meanwhile, prices for swine, broiler chickens and chicken eggs were driven down by rising productions. Overall economic stability of the northern region remained sound.
Headline inflation rate improved slightly from the previous month, as prices for fuel, raw foods including meat, chicken eggs, fresh vegetable, fish and marine animals increased. Unemployment rate was at low level of 0.8 percent, as a decline in agricultural employment was largely offset by rises in employment in wholesale and retail trade and construction industry.
Commercial banks’ deposits outstanding amounted to 612,726 million baht at end-May 2015, growing by 4.3 percent. However, the deposits outstanding dropped on a month-on-month basis as depositors switched to invest in higher yield debt instruments and authorities withdrew deposit funds to use on public projects. Credits outstanding amounted to 602,913 million baht at end-May 2015, growing by 5.3 percent as housing loans and loans for cooperatives rose. Most businesses did not take out loans for new investment, awaiting for clear signs of economic recovery. The loan to deposits ratio was 98.4 percent at end-May 2015, standing very close to that of the previous month. (BOT)

Monetary Policy Committee maintains policy rate at 1.5% per year

Mr. Mathee Supapongse, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 5 August 2015 as follows. The Committee voted unanimously to maintain the policy rate at 1.50 percent per annum.
Key considerations for policy deliberation are as follows. The Thai economy continued to recover gradually in the second quarter, and is expected to maintain the similar pace of recovery during the rest of the year. Nevertheless, downside risks increased from a slowdown in the Chinese economy and the adverse impact of domestic drought. Higher-than-expected improvement in tourism and high investment spending by the government remained the main growth drivers. Meanwhile, private consumption and investment improved at a measured pace. However, exports of goods contracted more than previously assessed due to subdued prices and reduced volume as a result of lower demand from trading partners, especially China and other Asian economies.
Headline inflation continued to stay in the negative territory due mainly to energy costs. However, it is likely to have bottomed out, and is expected to gradually pick up in the second half of the year as the base effect of high oil prices begins to wane. The Committee will continue to closely monitor domestic price development as the period at which headline inflation is expected to turn positive might be delayed as a result of limited demand-side pressure and slower-than-projected global oil price recovery.
In deliberating monetary policy, the Committee judged that the conduct of monetary policy has thus far eased monetary conditions, while the direction of exchange rate movement has stayed conducive to the economic recovery. Therefore, the policy interest rate should be kept unchanged at this meeting. The Committee were of the view that monetary policy stance should continue to be adequately accommodative, and will stand ready to utilize an appropriate mix of available policy tools in order to support the economic recovery, while maintaining long-term economic and financial stability. (BOT)

HEADLINES [click on headline to view story]

Update August 8, 2015

Economic conditions in the North for June 2015

Monetary Policy Committee maintains policy rate at 1.5% per year


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