Despite sluggish export growth, a V-shaped economic recovery began to gain momentum in July as domestic consumption and business sentiment improved, says the Bank of Thailand.
Roong: V-shaped recovery in progress
Roong Mallikamas, senior director for macroeconomic and monetary policy, said the slump had already bottomed out, and conditions were in the initial stage of a V-shaped recovery in the first month of the third quarter.
"A pickup in domestic consumption, improved signs of private investment and fiscal policy are the engines driving economic growth from the second half into next year," she said.
Earlier, Don Nakornthab, the central bank's director for economic policy, said a V-shaped recovery was expected to begin in the third quarter, with the momentum continuing throughout the year.
Although the central bank still maintains its growth forecast at 1.5% this year, governor Prasarn Trairatvorakul recently said 2% full-year growth was likely to be reached if the economy could grow by 4% in the second half.
The Finance Ministry on Thursday said it had raised its fourth-quarter budget disbursement target to 30% from 25% in a bid to ensure economic growth would come in at 2% this year.
The Private Consumption Index edged up by 0.2% year-on-year in July after a June contraction of 1.4%, as higher consumer confidence supported household spending.
"Consumer outlays on certain non-durable items such as fuel, foods and beverages, and household goods grew, while expenditure on durable items remained flat," the central bank said in a statement.
"Private investment improved slightly from last month, particularly construction in non-municipal areas, on account of a rise in overall private confidence. In addition, some businesses started to invest after receiving approval for investment projects and factory permits that had been held up in the preceding period."
Despite an increase in both construction in non-municipal areas and business sentiment, the Private Investment Index still contracted by 3.4% year-on-year last month after a 2.7% decline in June.
Overall economic activity in July was mostly unchanged from the previous month, as improving domestic spending was offset by slow recovery in exports.
Merchandise exports fell by 0.5% year-on-year in July after 3.8% growth in June, due to subdued demand from Asian economies, a drop in rubber prices, closure of some oil refineries for temporary maintenance and limited production capability to meet global demand for high-technology products.
Mrs Roong said sluggish export recovery, the manufacturing sector pending high inventory release and falling rubber prices in the agricultural sector had contributed to delaying momentum in the recovery.
Tourism recorded a slight increase in July, but remained contracted at 10.9% year-on-year, up from a 24.4% decline a month earlier.
The current account registered a deficit of US$864 million after a June surplus of $1.8 billion, due mainly to seasonal repatriation of profits and dividends by foreign companies.
The Monetary Policy Committee will take into account all related factors to assess its growth forecast including the recent reduction of fuel prices, said Mrs Roong.
The rate-setting committee will reconvene on Sept 17.