In October 2020, the Thai economy contracted at a higher rate as compared to the previous month, due to the fading of the temporary loan holiday measures. Private consumption indicators contracted after experiencing a marginal expansion in the last month, as the temporary factor of special loan holidays terminated. Merchandise exports value excluding gold continued to rise from the last month but contracted at a higher rate as compared to the same period the previous year partly from the high base effect last year. Likewise, private investment indicators exhibited a higher contraction. Meanwhile, public spending became contracted as a result of the delayed disbursement of current expenditures. The tourism sector, however, persistently experienced a severe contraction due to travel restrictions on foreign tourist arrivals.
On the economic stability front, headline inflation was less negative mainly driven by an increase in energy prices. The labour market continued to improve but remained vulnerable. The current account surplus decreased due to a higher deficit of net services, income and transfers.
Details of the economic conditions are as follows:
Private consumption indicators became contracted after experiencing a marginal expansion in the previous month, due to the decline in almost all spending categories. After the temporary factor of special long holidays terminated coupled with the high base effect last year in which the government implemented the economic stimulus measures, spending on non-durable goods and services softened. However, the overall private consumption remained to be on a recovery path, consistent with a gradual improvement of factors supporting consumer purchasing power including employment, farm and non-farm income as well as consumer confidence, together with new economic stimulus packages launched by the government.
The value of merchandise exports contracted by 5.6 percent from the same period last year. Excluding gold, the value of merchandise exports contracted by 5.0 percent, slightly worse than the previous month. However, manufacturing production experienced a lower contraction due to the automotive industry.
Private investment indicators higher contracted as compared to the previous month, led by investment in machinery and equipment, and construction. Investment in machinery and equipment contracted at a higher rate mainly due to imports of capital goods. Meanwhile, investment in construction contracted in line with a drop in residential construction activities.
Public spending, excluding transfers, contracted after continuously expanding in preceding periods. This contraction was a result of the delayed disbursement of current expenditures. Nevertheless, capital expenditures of the central government and state enterprises continued to grow and support the economic recovery.
The value of merchandise imports dropped by 12.1 percent from the same period last year. Excluding gold, the value of merchandise imports contracted by 9.9 percent. A higher contraction was observed in almost all categories compared to the previous month. The contractions include fuel, consumer products and capital goods. These are consistent with the contraction of domestic spending.
The number of foreign tourist arrivals continued to fall from the same period last year. This fall in arrivals wholly due to travel restrictions. The government has issued the Special Tourists Visa (STV) for tourists to visit Thailand. However, arrivals are still low.
On the overall economic stability, headline inflation was less negative mainly due to an increase in energy prices. Core inflation decreased partly due to the sales promotion offered by entrepreneurs. The labour market continued to improve, in terms of both employment and income, but remained vulnerable. This was partially reflected by a high unemployment rate and the high number of jobless claims in the social security system. The current account surplus decreased due to a higher deficit of net services, income and transfers while a surplus of trade balance being nearly the same.
To find out more about the economic and monetary conditions in Thailand for Oct 2020, visit the link here.