BoT touts Q2 economic growth, with caveats

BoT touts Q2 economic growth, with caveats

Consumer spending still in prolonged lull

People from all walks of life have lunch on the streets of the capital. Despite a general economic uptick, household purchasing power remains muted. (Photo by Patipat Janthong)
People from all walks of life have lunch on the streets of the capital. Despite a general economic uptick, household purchasing power remains muted. (Photo by Patipat Janthong)

The Thai economy got off to a good start in the second quarter, buoyed by solid exports and improved private consumption in April, but overall household purchasing power is not yet robust, says a senior official at the Bank of Thailand.

Higher non-farm income and a lower contraction of farm income improved household purchasing power, although it remains tepid.

In April, nominal farm income contracted 0.7%, improving from a contraction of 4.2% in March, 4.5% in the first quarter of this year, and 6.8% in the final quarter of 2017.

Higher agricultural goods, particularly rice and palm oil, also supported domestic consumption and farm income.

"Despite a contraction in farm income, it is improving and diversifying with the growing economy," said Chitkasem Pornprapunt, the central bank's director for economics and policy.

Domestic consumption surged 5.8% in April, the highest level since December, compared with 1.7% in March.

The country's private investment rose by 7% year-on-year in April, the fastest pace since January 2013. The solid growth was mainly attributed to investment in machinery and equipment and construction.

Newly registered motor vehicles for investment in April grew 12.1% compared with 0.2% in the previous month; real domestic machinery sales increased 11.9% from 3.7% in March; and real imports of capital goods rose 10.3% from a contraction of 9.3% in the month before, Mr Chitkasem said.

Healthy private investment was in line with the country's import expansion, particularly in durable goods. In April, the country's import volume was $18.71 billion, rising 22.7% year-on-year, while exports amounted to 18.9 billion, growing 14.6%.

The solid tourism sector also contributed to the economic growth.

Foreign travellers totalled 3.09 million in April, rising 9.4% year-on-year but declining from 3.49 million in March.

He said fresh foods prices hit their highest level in 14 months.

Bank of Thailand governor Veerathai Santipraphob said Thailand will be immune from the brewing political storm in Italy, given the country's solid fundamentals, low-level of foreign debt and high international reserves.

Thailand will also be less impacted by foreign investor movements as their Thai bond holdings are only 10% of the total, versus an average of 30% for other countries, Mr Veerathai said.

Meanwhile, state enterprises doled out 107 billion baht worth of investment budget during the four months through April, up 67% year-on-year, said Prapas Kong-Ied, director-general of the State Enterprise Policy Office (Sepo).

That larger disbursement could be attributed to the ramp-up of investment in big-ticket infrastructure developments, including a double-track rail section -- Jira-Khon Kaen-- electric trains in Bangkok and its environs, the Provincial Waterworks Authority's tap water system expansion and rising investment from PTT group.

For the October-April period, state enterprises took out 125 billion baht worth of investment budget, said Chanvit Nakburee, deputy director of Sepo.

State enterprises using business cycles based on the fiscal year drew down 53.5 billion baht during October to April, while those with operating by calendar year disbursed 72 billion for the January-to-April period.

Forty five state enterprises which use both the calendar and fiscal year have a combined investment budget of 484 billion baht for 2018.

State enterprises which managed to hit their budget disbursement targets, included the State Railway of Thailand, he said, adding it took out 20.3 billion baht.

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