Conflict over battery-plant incentive ‘threatens’ Thailand’s EV competitiveness
MONDAY, JANUARY 30, 2023
A measure to support production of electric vehicle (EV) batteries in Thailand has been delayed by a conflict between the finance and industry ministries, the EV board complained on Monday.
It said the measure – which features incentives for setting up EV battery plants – is as important in building Thailand’s EV industry as tax privileges and subsidies for EV imports.
“The measure to promote EV battery manufacturers to set up factories in Thailand should have been launched in October last year, but no progress has been made,” the EV board said.
The delay came after the Industry Ministry insisted EV battery manufacturers set up factories in Thailand before receiving support from the government.
The Finance Ministry wants the measure to be similar to other EV incentives, such as tax discounts and subsidies on importing EV batteries.
“The Finance Ministry’s idea aims to reduce the battery price and boost demand for EVs in Thailand since the battery price accounts for 50% of the whole EV,” the EV board said.
However, it said the Finance Ministry’s idea was that EV battery manufacturers who set up factories in Thailand must produce double the amount of imported batteries within two years, and three times the number within four years.
The EV board said more than 37,000 EVs were booked as of January this year.
It warned that Thailand could lose the opportunity to penetrate the EV market if the country is slower in gearing up production than rivals such as Indonesia.
Thailand’s unemployment rate drops to 1.2% as of November, statistics show
SUNDAY, JANUARY 29, 2023
A new census conducted by the National Statistical Office shows that the number of unemployed persons in Thailand has dropped by 95,000, with 620,000 new people entering the workforce.
Traisulee Traisoranakul, deputy government spokesperson, said on Sunday that statistics show that 39.82 million Thais were gainfully employed as of November last year, up by 620,000 from October.
She said the census found that Thailand has 58.73 million nationals who are at least 15 years old, and 40.36 million are at employment age. Of them 39.82 million are employed and 460,000 are not. She said 18.37 million are outside the workforce, including housewives, students, and seniors.
According to statistics, of the 39.82 million Thais employed, 12.34 million are in the agricultural sector and 27.48 million in non-agricultural sectors, including industry, commerce and service.
The figures can be further broken down based on work hours per week:
• At least 50 hours per week: 6.67 million people (5.95 million in October)
• 35-49 hours per week: 26.90 million (26.69 million in October)
• Fewer than 35 hours per week: 6.25 million (6.53 million in October)
Traisulee said the increase in people employed for more than 35 hours a week shows that there is more employment security and income.
She added that the number of unemployed people in November dropped by 95,000 persons in October to 4.65 million in November, while the unemployment rate dropped from 1.4% to 1.2%.
She quoted Prime Minister Prayut Chan-o-cha as saying that this was a clear sign of economic recovery, especially since the rate of unemployment had dropped to 1.2%, close to the pre-pandemic level of 0.9%.
Finance Ministry raises 2023 growth forecast to 3.8%
FRIDAY, JANUARY 27, 2023
The Finance Ministry on Friday raised the growth forecast for Thailand this year from 3% to 3.8%, citing a near 150% year-on-year rise in tourist arrivals as well as higher than expected domestic consumption as the main factors.
Declining fuel prices and weakening demand in key export markets, however, will help offset inflationary pressure, said Pornchai Thiraveja, the ministry’s spokesperson and director of its Fiscal Policy Committee.
He said the surge in tourists will primarily be from other Asian countries.
“This year, 27.5 million foreign tourists are expected to visit Thailand, up 147% year on year,” Pornchai said.
Exports, however, are expected to increase just 0.4% due to declining demand in key markets, he said.
He forecast that trade would see a surplus of US$3.1 billion this year, equivalent to about 0.5% of the country’s gross domestic product.
Private consumption and investment are forecast to expand by 3.5% and 3.6%, respectively, due to rising incomes and greater confidence in the domestic economy, he said.
Economic slowdowns and financial market volatility among trading partners, especially the United States and European Union, would negatively impact Thailand’s economy, he said.
“Geopolitical risks across the region will affect Thailand’s security and production,” Pornchai added.
Thailand’s economy will also be affected by China’s economic growth, following the relaxation of its zero-Covid policy, he said.
“Fiscal policy still has an important role for mitigating the impact of various crises and supporting economic expansion,” Pornchai said.
Thailand’s SCB expects two more policy rate hikes to 2%
THURSDAY, JANUARY 26, 2023
Siam Commercial Bank (SCB)’s research arm predicts the Bank of Thailand will raise the policy rate twice by 0.25 points to 2% this year.
The SCB’s Economic Intelligence Centre (EIC) issued the forecast on Thursday, a day after the Monetary Policy Committee raised the rate by 0.25 points to 1.5%.
The EIC said it expected two more hikes, in March and May.
It also forecast Thai GDP growth of 3.4% this year driven by tourism, consumption and spending by the private sector. It cited the return of Chinese tourists after Beijing eased travel restrictions sooner than expected. The tourism revival would lead to increased consumption and spending, it added.
But the EIC warned that growth of the Thai export sector would be sluggish following contraction in three successive months up to December 2022 due to the global economic slowdown.
Thai exports would also come under pressure from new import taxes imposed by Europe and India, which are key trading partners, it added.
The headwinds would see Thai export growth of only 1.2% growth this year, the EIC said.
It predicts Thailand’s headline inflation will drop from 6.1% last year to 3.2% this year, still above the central bank’s 1-3% target. Inflation would exceed the target due to high energy and food prices.
It forecast core inflation would rise from 2.5% last year to 2.7% this year.
The EIC’s currency prediction has the baht rallying to between 31.5 and 32.5 against the US dollar by the end of this year. The Thai currency has risen 5.6% against the greenback since the start of the year.
Capital investment up by THB200m in 2022, but nearly 22,000 businesses fold up
WEDNESDAY, JANUARY 25, 2023
As many as 21,880 businesses with a total registered capital of 127.04 billion baht ceased operations in 2022, the Department of Business Development said on Wednesday.
“This is in line with liquidation trends in the past five years,” said Thosapone Dansuputra, the department’s director-general.
The top three types of businesses going into liquidation were: 2,012 general building construction enterprises, which accounted for 9% of total enterprises that went into liquidation, followed by 1,023 real estate firms (5%), and 623 restaurant businesses (3%).
Businesses with less than 1 million baht capital accounted for 71.52%, or 15,649 businesses. It was followed by 5,200 businesses with capital of 1-5 million baht (23.77%); 916 businesses with 5-100 million baht capital (4.19%), and 115 businesses exceeding 100 million baht capital (0.53%).
In 2022, 76,488 new businesses were established across the country, 3,530 — or 5% — more than in 2021.
The top three businesses were general construction (7,061), accounting for 9%; real estate (4,833), accounting for 6%; and restaurant (3,014) accounting for 4%.
Total capital investment of newly established business was 429.82 billion baht in 2022, up 200.02 billion baht, — 87.04% — over 2021.
Of the newly established businesses, 52,674 (68.84%) have capital of less than 1 million baht; 22,583 businesses (29.52%) have capital in the range of 1-5 million baht; 1,014 businesses (1.33%) have capital of 5-100 million baht; and 217 businesses (0.28%) have capital of over 100 million baht.
As many as 850,480 businesses with a total capital of 21.19 trillion baht are operating in Thailand, as of December 2022.
Of the total, 200,437 — 23.57% — were limited partnership and registered ordinary partnership; 648,661 — 76.27% — were limited companies; and 1,382 — 0.16% — were public limited companies.
Meanwhile, 499,669 businesses — 58.75% — have less than 1 million baht in capital, followed by 257,061 businesses (30.22%) with 1-5 million baht capital, 76,340 businesses (8.98%) with 5-100 million baht capital, and 17,410 businesses (2.05%) with more than 100 million baht.
Despite global slowdown, Asia’s economies show resilience and growth for 2023
WEDNESDAY, JANUARY 25, 2023
Asia can defy a global economic slowdown in 2023 through an acceleration in digital transformation, greater regional coordination, and balanced monetary policies, according to new research from the London-based think tank, Asia House.
The Asia House Annual Outlook 2023 examines how Asia’s economies can prevail and deliver robust growth through increased domestic demand for goods and services, countering the global headwinds of high inflation, tighter monetary policy and increasing geopolitical tensions.
Key among the Annual Outlook’s recommendations are those relating to prioritising innovation – to spur carbon pricing, lower green premiums for zero-carbon alternatives, and boost underfunded and high-impact projects with blended finance.
‘Asia is likely to prove resilient if investment and financial flows are directed to digital and green innovation to underpin sustainable growth and investment,’ the Annual Outlook finds.
However, and mirroring the global outlook, Asia is susceptible to risk and faces multiple and multi-faceted shocks, such as energy-price volatility, geopolitical conflict, and higher borrowing costs.
Asia House assessed eight key economies in Asia across metrics conducive to meeting these challenges. In two indices published today, the think tank analyses the performance of China, India, Indonesia, Japan, Malaysia, the Philippines, Thailand, and Vietnam in the critical areas of green finance and digitalisation readiness – areas that will unlock future productivity and enable sustainable growth across the continent.
Asia House’s Economic Readiness Indices suggest that prioritising economic readiness to tackle both climate change and digitalisation, and the policies that link the two, will create higher growth.
China will see increased growth – albeit sluggish – having abandoned its zero-Covid policies. It also shows an improvement in its scores for economic readiness for green finance.
India will see continued economic recovery and is on track to be one of the fastest-growing economies globally. However, the country is susceptible to financial volatility and it has the lowest readings in readiness for both green finance and digitalisation.
Japan is likely to bear the brunt of multiple financial shocks, including a weak yen and higher energy prices – both of which reduced its Readiness Index for green finance. Japan’s digital readiness scores improved for 2023.
Vietnam is likely to register one of the strongest economic growth rates in 2023, owing in part to its vibrant external sector and domestic policy settings that will catalyse inward investment.
Malaysia is making significant strides, underpinned by the strength of domestic demand and digitalisation.
Thailand‘s economic readiness readings for green finance registered the largest rise according to Asia House.
Indonesia will show economic resilience in 2023. It has struck the right balance in monetary policy in terms of encouraging growth while taming inflation.
The Philippines is likely to grow, which presents an opportunity for the country’s policymakers to improve the domestic ecosystem for green finance and digitalisation.
Asia House comment
Michael Lawrence, Chief Executive of Asia House: “Against the backdrop of a weak global economic outlook for 2023, Asia’s economies may defy the trend and deliver robust growth despite the challenges of high inflation, rising interest rates, fuel price volatility and geopolitical tensions.
“The Asia House Annual Outlook is published to give key insights into the region’s economies and increase understanding of the opportunities and obstacles in Asia in an increasingly unpredictable and turbulent world”.
Phyllis Papadavid, Director of Research and Advisory, Asia House: “Our outlook indicates that Asia’s growth prospects continue to hinge on an acceleration in digital transformation, greater regional coordination, and striking the right balance in broader monetary policy across the region.
“Furthermore, the Asia House Economic Readiness Indices suggest that prioritising economic readiness for both climate change and digitalisation, and the policies that link the two, will be essential for Asia’s higher growth trajectory.”
Policy recommendations
Drawing on the Indices, the Asia House Annual Outlook 2023 report includes several recommendations for policymakers across Asia.
Scaled-up regional coordination in Asia is necessary to bolster economic integration further, particularly in the form of expanded economic zones and investment corridors.
Enhanced and coordinated reserve management is needed at a time when Asia’s reserves are declining.
By adopting carbon-pricing mechanisms, the ‘green-premium’, or the additional costs of opting for green technology, will be reduced. The leveraging of private investment and risk absorption will support scaled-up sustainable finance.
Innovations in blended finance – using development funds to spur private investment – need to funnel capital into high-impact and under-capitalised green projects.
Asia’s broader digital access and digital skills, particularly in the rural sectors in its larger economies, is a policy gap.
Thai exports fell for third successive month in December
WEDNESDAY, JANUARY 25, 2023
Thai exports fell for a third consecutive month in December but the 2022 total rose 5.5% year on year to US$287.06 billion (9.406 trillion baht), according to the Commerce Ministry.
Total imports last year rose 13.6%, leading to a trade deficit of $16.122 billion (528.56 billion baht).
December saw exports contract 14.6% year on year while imports shrank 12%, generating a trade deficit of US$1.03 billion (33.85 billion baht).
December’s export contraction was driven by industrial products (down 15.7%), agricultural products (down 11.6%), and agro-industrial products (down 10.8%).
Thai export markets that saw the biggest expansion in 2022 were the Middle East, United Kingdom, Canada, United States, CLMV, other Asean countries and South Asia.
Thai export growth last year was led by sugar, telephones, gems and jewellery, vegetable/animal fats and oil, transformers and components, semiconductors, and processed chicken.
The Commerce Ministry has targeted a 1-2% export expansion in 2023, lower than the 4% targeted in 2022. It said the lower target was due to the stagnating global economy, baht strengthening, rising fuel prices, and manufacturing costs.
Export expansion this year would be driven by the reopening of border checkpoints, increasing global food demand, and easing of global logistics problems including the container shortage, it added.
Thai vehicle exports in December highest in 45 months
TUESDAY, JANUARY 24, 2023
Thailand exported 111,605 vehicles in December, the highest in 45 consecutive months, the Federation of Thai Industries (FTI) said.
Surapong Paisitpatnapong, FTI deputy chairman, said on Tuesday that the export of fully assembled units in December rose 10.17% from the same month in 2021.
During 2021, Thailand exported 1,000,256 completely built unit (CBU) vehicles, marking a 4.28% increase from the previous year, Surapong added.
He said exports to Asia, Middle East, Africa, Central and South America showed a definite increase. However, he said, exporters were still suffering from a drop in the availability of shipping liners.
He added that 158,606 vehicles were manufactured in December, up 2.75% from the same month in 2021.
Automakers were able to produce more vehicles because the supply of semiconductor parts has picked up.
In 2022, 1,883,515 vehicles were manufactured in Thailand, marking an increase of 11.73% year-on-year, Surapong added.
He said 82,799 vehicles were sold domestically in December, down 9.02% from the same month in 2021.
The FTI believes 1.95 million vehicles will be manufactured this year – 1.05 million for export and 900,000 for local consumption.
Thailand likely to hike key interest rate by 25 basis points tomorrow
TUESDAY, JANUARY 24, 2023
Kasikorn Research Centre (KResearch) on Tuesday expected the Bank of Thailand’s Monetary Policy Committee (MPC) to raise Thailand’s key policy rate by 25 basis points to 1.50 per cent to fight inflation.
The MPC, at its previous meeting on November 30, had voted unanimously to raise the interest rate by 25 basis points to 1.25% to control inflation.
KResearch said the Thai economy is continually recovering from the impact of the pandemic due to China’s earlier-than-expected reopening of its borders, which would help the tourism industry.
However, the economy is still being pressured by inflation, the centre said, adding, headline inflation in December had increased to 5.89% while core inflation is still at the same level as the previous month at 3.23%.
KResearch believed that after the revision in January, the MPC would hike the interest rate by 25 basis points one more time to 1.75% within the first quarter of the year, and maintain the rate until the year-end to control the inflation in 2023 within the target of 1-3%.
KResearch forecast that the MPC could be pressured to raise the interest rate to higher than the estimated 1.75% target if Thailand’s inflation continues to rise for too long, or the US Federal Reserve decides to use aggressive rate hikes.
The centre also predicted a K-shaped recovery for the overall economy in 2023 with uneven growth distribution among different industries. Tourism and service industries will enjoy significant growth, while those related to export sectors will suffer from the recessive global economy and the strengthening of the baht.
Location and innovation ‘crucial’ to Thailand Inc’s success in fracturing world
TUESDAY, JANUARY 24, 2023
Thai businesses must adapt to the world’s fracturing geopolitical landscape, using innovation and location to create competitive advantages, Vice Foreign Minister Vijavat Isarabhakdi told industry leaders on Monday.
Vijavat was speaking at the seminar “Geopolitics: The Big Challenge for Business”, organised by Krungthep Turakij newspaper.
He cited global social and economic impacts of the Russia-Ukraine war, including soaring inflation amid food and fuel shortages. He also warned that the conflict shows no sign of ending anytime soon but is instead escalating, with Russia now threatening to use nuclear weapons if western countries continue to provide armaments to Ukraine.
The conflict has raised the spectre of a new Cold War, as the United States leads a coalition of democracies against Russia and China.
But Vijavat also pointed to different headwinds facing Thai business.
“The modern world that has been divided by geopolitics is also filled with other challenges, including Covid-19 crises in several countries, climate change, and digital disruption from demand for e-commerce during the pandemic and the rise of artificial intelligence,” said Vijavat.
Thai businesses need to adjust their strategies to cope with the new geopolitical trend and challenges to stay ahead of the game, he said. Those that stand still are at risk of being forced to change or even being driven out of business by new regulations brought in to govern changing trends, he warned.
Incoming regulations affecting Thai exporters include the European Union’s carbon border adjustment mechanism and deforestation edict.
As digital transformation accelerates, meanwhile, Thai businesses must adopt innovations to strengthen their businesses, including big data, analytic tools, AI technology, and new markets online.
Businesses should also take advantage of Thailand’s geographic position in the heart of Asia’s hotspot for economic growth, Vijavat said.
“Thailand is located in the centre of the ‘growth triangle’ marked by India, China and the Asean region. This area has a high potential for economic expansion despite the ongoing Russia-Ukraine conflict and the pandemic. We must exploit this location advantage by attracting foreign investment, especially from corporations migrating out of conflict zones.”
Vijavat advised giant corporations to pave the way by investing in infrastructure and creating new markets, which would attract small and medium enterprises to join and strengthen the supply chain.
“Using innovation and location advantage is key to boosting Thailand’s competitive edge in the modern world shaped by geopolitics,” he concluded.
She quoted Prime Minister Prayut Chan-o-cha as saying that this was a clear sign of economic recovery, especially since the rate of unemployment had dropped to 1.2%, close to the pre-pandemic level of 0.9%.
The FTI believes 1.95 million vehicles will be manufactured this year – 1.05 million for export and 900,000 for local consumption.
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