Consumer confidence will drop further to hit a 15-year low if no functioning government is installed in the second half of this year, warns the University of the Thai Chamber of Commerce (UTCC).
Consumer confidence slipped to its lowest in nearly 13 years as people were concerned about political instability and a gloomy economy, the latest survey by the UTCC revealed yesterday.
The consumer confidence index dropped to 68.8 points last month from 69.9 in February. The index, which has fallen for 12 straight months, is at its lowest since November 2001.
"Consumers are concerned about political uncertainties, the economic slowdown and higher prices, while the global economy remains fragile," said Thanavath Phonvichai, vice-president of the UTCC’s research centre. "Spending is likely to remain tepid until the end of the second quarter."
According to Mr Thanavath, the economy should recover by the second half of the year and grow by 2-3% for the whole year, but only on the condition that a new government is in place and acceptable to the majority of people.
The projection was also based on the appointment of a new Board of Investment (BoI), which is instrumental in unblocking investment applications worth as much as 600 billion baht currently shelved because of an absence of the board.
Normally, the BoI meets every month. Its board is chaired by the prime minister and members include ministers and permanent secretaries of economic ministries, four experts and the chairmen of the Federation of Thai Industries, the Thai Chamber of Commerce and the Thai Bankers’ Association. Members’ terms expired last October.
The BoI’s subcommittee is by law allowed to approve investment privileges for applications valued below 200 million baht.
Those of greater value need to go through the BoI board.
If the political impasse continues and a functioning government fails to be installed during the period, Mr Thanavath warned the economy is highly likely to see flat growth or 1.5% growth at best.
He said other negative factors include lower farm product prices and widespread drought. But he noted that most employers have yet to lay off workers because of a labour shortage.
Isara Vongkusolkit, chairman of the Thai Chamber of Commerce, said the current political climate will continue to batter consumers’ confidence.
"Political uncertainty leads people to be cautious with their spending, resulting in falling sales," he said.
Mr Isara said businesses desperately need political problems to end as soon as possible, urging all parties involved in the political turmoil to settle the problems.
"People will be harder hit if the problems are allowed to continue. It’s fortunate that exports and tourism are starting to recover," he said.