Political uncertainty hits confidence

Political uncertainty hits confidence

Private consumption registers marginal improvement in September

Domestic political uncertainty is putting pressure on consumer confidence, though private consumption registered a small improvement last month, says a senior Bank of Thailand official.

"Politics is a key factor we are monitoring. Domestic politics has not directly affected the Thai economy, but it has put pressure on fragile confidence for both domestic consumption and investment," said Chayawadee Chai-Anant, senior director of the economic and policy department at the central bank.

The economy in September improved from the previous month in terms of economic activities in several sectors.

Public spending continued to be the main driver of the economy, with greater expansion owing to both current and capital expenditures, said Ms Chayawadee.

Private consumption indicators became flat in September compared with the same period last year after experiencing a contraction in the preceding period, and improved from a 0.3% contraction in the previous month.

Private consumption declined by 0.1% year-on-year in the third quarter, up from a 10.2% contraction in the previous quarter.

The improvement was supported by the announcement of special long holidays to substitute for the Songkran festival that was postponed from April, together with the improvement in household income and consumer confidence, she said.

As a result, spending on non-durable goods bounced into a positive growth territory, while spending on other categories marked smaller contractions, especially durable goods, partly influenced by last year's low base effect, said Ms Chayawadee.

Apart from domestic consumption, other economic indicators also showed improving signs in September.

Merchandise export value excluding gold and private investment indicators exhibited lighter contractions, consistent with the improvement in manufacturing production.

In September, Thai exports contracted by 4.2% year-on-year, improving from August's 8.2% contraction.

For the third quarter, the country's exports contracted by 8.2%, up from a 17.8% decline logged in the second quarter, due to improved automobile exports.

Manufacturing production contracted less following the improvement in exports and domestic spending, together with the low base effect last year that occurred in automotive and petroleum sectors.

Private investment indicators contracted at a slower pace compared with the previous month, led by investment in machinery and equipment.

This was attributed to a gradual recovery in domestic and external demand as well as the upturn in business sentiment.

Investment in construction, however, expanded at a lower pace as construction material sales declined.

Foreign tourist arrivals remained at zero in September, the sixth consecutive month, as international travel restrictions remained in place.

The central bank will continue to monitor the outbreak across the world, especially in terms of a second wave and reopening measures for offshore travellers.

The country's labour market in September marginally improved but remained vulnerable, as reflected by falling number of workers registered for the temporary suspension of business, but the number of jobless claims in the social security system has remained high, according to the central bank.

"The economic recovery momentum in the third and fourth quarters this year is expected to continue improving, and all economic indicators are anticipated to display a lower contraction rate," said Ms Chayawadee.

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