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https://www.nationthailand.com/thailand/economy/40022530

MPC may up Thailand’s policy rate by 25 points to fight inflation

MONDAY, NOVEMBER 28, 2022

The Monetary Policy Committee (MPC) may raise Thailand’s policy interest rate by 25 basis points to 1.25% per annum when it meets on Tuesday, the Kasikorn Research Centre predicted.

KBank’s research arm said MPC was under pressure to raise the policy rate because inflation remains high even though the Thai economy is recovering.

The centre said Thailand’s headline inflation fell for a second consecutive month in October to 5.98% but was still higher than the MPC’s target.

The centre noted that while the headline inflation had dropped, October’s core inflation had risen to 3.17% year on year, indicating that the price of goods was still rising even though pressure from energy prices is easing.

The centre said the Thai economy is expected to continue improving after it expanded by 4.5% year on year in the third quarter.

“As a result, the MPC can be expected to up the policy rate again by 25 basis points,” the centre said in its analysis released on Monday.

Kasikorn Research also said that MPC’s decision on whether it would raise the policy rate again next year will depend on the rate of inflation, recovery trend and policy rate increases set by the US Federal Reserve.

The centre predicts that Thailand’s policy rate will be pushed up to about 1.75% to 2% next year.

After keeping the interest rate unchanged for more than two years during the Covid-19 pandemic, the MPC decided to increase the policy rate by 25 basis points to 0.75% in August.

The following month, it further raised the policy rate by 25 basis points to 1% per annum with immediate effect.

The MPC signalled in June that it would increase the policy rate to cool down inflation. In June, the MPC voted to maintain the policy rate at 0.50%, though three of its members wanted to boost it by 25 basis points.

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https://www.nationthailand.com/thailand/economy/40022522

Job creation in first nine months exceeds pre-Covid level

MONDAY, November 28, 2022

Employment in nine months of 2022 surpassed the pre-Covid level as Thailand’s economy has been steadily recovering from the impact of the pandemic, the National Economic and Social Development Council (NESDC) said on Monday.

Some industries, however, are still facing labour shortage, it added.

At the end of the third quarter of 2022, 39.56 million people were employed in Thailand, up 2.7% or by 1.03 million people compared to the employment figures in the same period of 2019, before the pandemic.

Of the employed, 37.09 million are Thais and 2.47 million are foreigners, the NESDC reported, while some 490,000 people are currently unemployed.

The NESDC said employment among Thais has risen by 5.1% year on year, especially in key manufacturing sectors. However, employment in agriculture, fishery, hospitality and service industries saw a downward trend.

Employed foreigners plunged 23.2% year on year due to migrant workers from neighbouring countries heading back home during the pandemic, who are yet to return.

This has resulted in labour shortage in industries requiring manual workers, such as manufacturing, construction, retail, agriculture, forestry, and fishery, the NESDC said.

The council estimated that foreign workers would increase next year in keeping with a rising trend that started at the end of the second quarter this year, increasing from 2.26 million to 2.47 million people in just three months.

Myanmar nationals dominated Thailand’s unskilled labour market at 71.94% of total foreign unskilled labour, followed by Cambodians (19.34%), Laotians (8.71%) and Vietnamese (0.01%).

Meanwhile, about 240,000 foreigners are being employed as skilled labourers, or 9.89% of total foreign labour in Thailand.

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https://www.nationthailand.com/thailand/economy/40022520

Thai chamber of commerce presents roadmaps to government for new growth, boosting competitiveness

MONDAY, November 28, 2022

The chambers of commerce around the country are pushing for roadmaps to drive new growth for Thailand – especially measures to improve Thailand’s competitiveness ranking, which plunged by five spots this year.

The roadmaps were drafted during the 40th general assembly of the chambers of commerce held by the Thai Chamber of Commerce (TCC) in Ubon Ratchathani province from Friday to Sunday.

At the conclusion of the assembly, titled “Connecting the dots: Enhancing Thailand’s Competitiveness”, TCC chairman Sanan Angubolkul summed up the roadmaps in three words – “Connect, Competitive, Sustainable”. Some 1,200 representatives of chambers of commerce and state agencies joined the assembly.

Speaking to the press after the assembly, Sanan said an urgent agenda of the provincial chambers of commerce is to coordinate efforts between the government and private sectors to raise Thailand’s competitiveness ranking.

Sanan said Thailand is suffering from an economic structure crisis that has caused the country’s competitiveness ranking to fall five spots from last year.

According to the World Competitiveness Ranking 2022, Thailand fell from 28 last year to 33 out of a total of 63 economies this year, as the Kingdom tries to deal with the impact of the Covid-19 pandemic.

Sanan said competitiveness could be enhanced with government support for small and medium-sized enterprises (SMEs) that need to apply digital transformation to increase the effectiveness of their business operations.

“Digital transformation is not an alternative or a way out for SMEs, but it must be a main course of action for their success amid economic crises that are piling up this year,” Sanan said.

Apart from the economic structure crisis, Sanan cited three other crises:

• Energy prices and consumer products’ prices

• Rising cost of manufacturing and inadequate agricultural materials

• Financial crisis for households and SMEs.

“So, the solution for Thailand to return to economic strength is to find ways to increase its competitiveness in all dimensions – especially the economic dimension through mechanisms that will integrate the work of all sectors,” Sanan said.

The roadmaps were drafted in terms of flagship projects for driving provincial economies, including agriculture, trade, investment and tourism projects. They have been compiled into a white-cover book that the TCC submitted to the government at the end of the assembly.

Deputy Prime Minister and Energy Minister Supattanapong Punmeechaow represented the government and received the white-cover book from the TCC at the press conference on Sunday.

During the press conference, Sanan further explained the roadmaps as:

■ Connect — the TCC aims to forge cooperation among networks in Thailand and abroad. The TCC aims to increase the number of its members from 100,000 to 200,000 within three years with a goal to increase SMEs’ economic strength. And the TCC will connect chamber members nationwide to brainstorm ideas for developing the economies in the provinces.

■ Competitive — the TCC will support government efforts to increase Thailand’s competitiveness in all dimensions. It called on the government to follow up on the success of the recent hosting of the Apec Summit to draw more foreign direct investments into the country as well as expand free trade agreements with other countries.

Sanan said the TCC will work closely with the Board of Investment to draw investments from strategic targets, which are Saudi Arabia, Vietnam and India, while preserving investors from Japan and the United States.

The TCC will ask the Office of the Public Sector Development Commission to revise the rules to make it easier for foreign businesses to invest and operate in Thailand.

The TCC also will call on the government to revise and reform laws on property held by foreign investors, Sanan added.

The chamber also will work with the Tourism Authority of Thailand to implement the Trade & Travel policy by creating soft power for each province and promoting tourism in secondary-tier provinces, Sanan added.

■ Sustainable — the TCC and its provincial chambers will push for the implementation of the Bangkok Goals on the Bio-Circular-Green (BCG) economic model for developing economies in provinces with sustainability during the next five years. The BCG model is aimed at reducing wealth gaps nationwide, Sanan added.

During the assembly, Natural Resources and Environment Minister Varawut Silpa-archa delivered a special speech on Saturday to back up the BCG economic model, which he said must be implemented together with the ESG (environmental, social and corporate governance) policy.

Varawut said the government has a policy to implement the BCG economic model in order to slash carbon emissions by 40% within eight years, but the administration needs cooperation from the private sector to reach the goal.

Varawut said Prime Minister Prayut Chan-o-cha had pledged the goal during an international climate conference last year.

He added that the BCG economic model would be linked to employment of workers in the agricultural and food sector, health and medical sector, bio-energy and tourism. The value of BCG-related businesses would rise to 4.4 trillion baht, equivalent to 25% of Thailand’s GDP, in the future, he said.

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Prayut tenure ruling a boon for Thai economy, says TCC chief

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https://www.nationthailand.com/thailand/economy/40022519

MONDAY, November 28, 2022

Siam Commercial Bank (SCB)’s Economic Intelligence Centre (EIC) revised up Thailand’s economic growth forecast to 3.2% in 2022, thanks to momentum from the tourism sector and private consumption recovery.

The 2023 growth forecast is downgraded to 3.4%, given risks of global slowdown and uncertainties that overshadow Thai exports and investment, the centre said on Monday.

EIC’s previous growth forecast in 2022 was at 3.0%. An upward revision was attributed to a buoyant rebound in tourism and private consumption, following improvements in tourism and related service sector as well as labor income. 

However, the 2023 growth forecast is revised down to 3.4% (from 3.7%) since the signs of global economic slowdown became more apparent amidst rising uncertainties. Some major economies will soon enter a recession, and this would weigh down on Thai exports and investment ahead. 

Nonetheless, a solid rebound in tourism —thanks to the return of foreign arrivals— would provide significant support to Thailand’s economy in 2023. EIC anticipated the return of 28.3 million tourist arrivals next year, considering high travel demand and China’s easing of the Zero-Covid policy. 

Domestic tourism also regained its pre-pandemic pace, thus adding impetus to tourism revenue, related service sectors, and domestic consumption. 

Despite upbeat outlook, Thailand would still witness an uneven rebound as some households and businesses remain fragile. Regarding inflation outlook, headline inflation would be gradually declined and lied above the target at 6.1% and 3.2% in 2022 and 2023, respectively. Inflationary pressures still remain high due to high energy and food prices that somehow embedded in core inflation.

Somprawin Manprasert, First Executive Vice President, Chief Economist of the EIC, and Chief Strategy Officer at the Siam Commercial Bank PCL, stated that “We see a clearer sign of global economic slowdown this year and more to come in 2023, given rising uncertainties from elevated inflation, prolonged energy crisis, and synchronized monetary tightening worldwide. Some advanced economies —such as the UK and EU countries— will head for a recession by late 2022, whereas the US might also witness in H2/23. EIC thus downgrades the global growth forecast from 3.0% to 2.9% in 2022 and from 2.7% to 1.8% in 2023.

“In our base case, the global economy has yet to enter a recession since many countries would still record growth. For instance, China’s economy should make a steady rebound in line with the relaxation of Zero-Covid policy. Nevertheless, unexpected circumstances—such as the escalation of international conflicts or inflation surges which prompt tighter monetary policy responses—might also push the global economy into a recession.”

He further added that “Globally, high inflation is here to stay despite the figures in some countries already passing its peak. In particular, EIC expects that major economies will experience inflation outstripping the central bank’s targets for the next 1-2 years. This is because inflationary pressures start to entrench and service demand strengthens after demand for durable goods eventually rebalance to normal. Hence, major central banks would carry on a tight monetary policy into 2023—albeit with slower rate hikes—and keep policy rates high until inflation settles back within the target.

“Going forward, fiscal policy will shift focus from fiscal stimulus towards more fiscal sustainability, since the COVID-19 crisis left many countries with massive public debt piles. Furthermore, given high uncertainties surrounding the global economy and monetary policy stance, global financial markets might face higher volatility and risks of market liquidity crunch alongside a tightening global financial condition. So far this year, risk-off sentiment took place resulting in a significant drop in risky asset prices worldwide. This would, in turn, hamper wealth effects and consumption ahead.”

Thitima Chucherd, Head of Economic and Financial Market Research of the Economic Intelligence Center (EIC), stated that “In EIC’s view, the Thai economy will witness a modest yet uneven rebound. The tourism sector and consumption are the key drivers, whilst impetus from exports and investment significantly subside. As living costs and business costs remained high, some households encountered their expense exceeding income, whereas firms recovered on uneven ground. This was evident in an increase in the number of fragile households during the Covid-19 pandemic. The figure stood at 2.1 million households or up 24% in two years. Businesses rebound unevenly. Firms that cater to demand from consumption recovery or align with the global trends were among the first to pick up. Meanwhile, some firms remained exposed to uncertainties and thus slowly recovered, given risks from global downturn and emerging mega trends.”

She also added that “There remain high uncertainness—from both domestic and external conditions—that overshadow Thailand’s growth outlook in 2023. In our base case, the recession is somewhat unlikely and the Thai economy should return to its growth potential by the end of 2024. Yet, if major central banks hike policy rates further by 100 bps above our base case in 2023—for instance, if the Fed raises its policy rate to 5.75-6.00%—this might trigger a global recession. In this gloomy scenario, the probability of Thai economy entering a recession next year will be greater than 80%. However, the government still secures enough policy room to cushion uncertainty to the Thai economy, yet the fiscal space has been narrowing since the aftermath of the COVID-19 crisis.

“As for the monetary policy outlook, we expect the MPC to raise its policy rate gradually (by 25 bps in each meeting) to 1.25% at year-end 2022, followed by another three rate hikes to 2% in H1/23. Such gradual normalization approach would gear up the monetary policy stance in line with Thailand’s long-term economic growth path. Also, we believe the BOT will carefully adjust the pace of its policy rate hike to ensure that the policy normalization—both monetary policy and financial measures being gradually lifted next year—will not overly tighten financial condition and derail Thailand’s economic recovery in the wake of global economic slowdown and rising uncertainties.

“Meanwhile, the Thai baht should continue strengthening until next year. The reason behind is that the US dollar tends to weaken as the Fed becomes increasingly dovish and the investor sentiment towards risky assets improves. In addition, the baht would gain impetus from Thailand’s economic recovery—backed by current account surplus that likely continues into 2023, capital inflows to the Thai financial market, and inflation which tends to slow down faster than the US reading. In consequence, EIC anticipates the baht to hover around 36-37 against the US dollar at year-end 2022, before appreciating to 34.5-35.5 baht/USD at year-end 2023.”

“Looking ahead, Thailand’s economy is still subject to downside risks, namely: (1) Sharp slowdown in the global economy that could deter exports and investment, (2) Uncertainties over China’s Zero-Covid policy which affect both incoming Chinese tourists and Thai exports, (3) High inflation, interest rates, and debt that left fragile households and firms further delayed recovery, and lastly (4) Political uncertainty which that could dampen investor sentiment,” Thitima emphasized.