Economic indicators in April worsened from March, FOREX but strong export performance the only redeeming feature
Private consumption dropped in April 2021 MoM because of the third wave of Covid-19 outbreak. The private consumption index (PCI) surged 8.7% YoY in April, following a 3.7% YoY gain in March. But this was large due to the low base from the 2020 lockdown. Meanwhile, it declined by 4.3% MoM in April as the impacts from the third wave weighed on economic activity. Furthermore, the consumer confidence index fell to 43 in May 2021 from 46 a month earlier, the lowest level since February 1999. This is consistent with the rapid increase of daily infection cases since the beginning of April.
Despite recent strong export growth, Thailand’s manufacturing PMI decreased to 47.8 in May 2021, down from 50.7 in the previous month. This was the lowest reading in three months, as the economy was hammered by the third wave of Covid-19. Outputs, new orders, and buying levels all fell. In addition, the latest clusters of infections seem to be centred around factories which have led to disruption to manufacturing activities in several provinces around the country.
Exports increased 19.1% YoY, mainly due to a rebound in demand from key trading partners. Excluding gold and petroleum-related items, exports rose 34.6% YoY in April, led by advances in automotive (+124.3%), electrical appliances (+53.6%), and electronics (+22.9%). However, recent strong export performance could face a speedbump due to the ongoing shortage of shipping containers and semiconductors.
The private investment index increased 11.9% YoY but dipped 3.1% MoM as investment in machinery and equipment declined. Delving into detail, real capital goods imports and real domestic machinery sales climbed by 21.2% and 20.1% YoY, respectively. The reflects a strong global demand for manufacturing products.
Thailand’s tourism and hotel industries have been hit hardest by the latest outbreak. According to the Ministry of Tourism and Sports, there were only 70,339 international visitors to Thailand in April 2021, down from 76,199 the previous month. As a result, we maintain our projection of far fewer than 1 million visitors in 2021, lower than the government’s target of 3 million.
Due to upbeat outlook for US growth, the baht depreciated against the US dollar in April 2021. This was in line with the NEER baht index’s decrease. (Chart 3) Moreover, the Thai baht remains one of the weakest currencies in Asia (-1.8% in April and +0.1% in May) with overreliance on foreign tourist spending. Plans to reopen the country via the Phuket model soon could be subject to delay as Thailand has yet to flatten the curve of new daily infections. That said, the vaccination procurement seems to have gained traction which could surprise many people on the upside. We seem to be following the UK approach where we may fail to contain the pandemic but will overcome it only with rapid vaccination. More jabs, more jobs indeed.