While higher inflation agitated Thais and slowed the country's economy in March, the outlook remains a path towards recovery, according to the Bank of Thailand.
The Thai economy decelerated in March 2022 compared with February because of a reduction in domestic spending in the private sector, both in terms of consumption and investment, while activity in the manufacturing sector also decreased, the central bank's senior director for economic and policy department Sakkapop Panyanukul said yesterday.
The central bank, reporting on the economic and monetary conditions for March and the first quarter of 2022, said the slowing economy in March on a month-on-month basis was a result of the outbreak of the Omicron variant of Covid-19, higher production costs and the rising cost of living.
He said private consumption indicators in March after seasonal adjustment grew 0.5%, compared with 2.2% expansion in February.
This was consistent with a deterioration in consumer confidence and household purchasing power as a result of the Omicron outbreak and rising living costs, in line with the soaring inflation rate led by energy and food prices.
Private investment indicators after seasonal adjustment expanded 1.9% in March compared with 3.3% in the previous month, in accordance with business sentiment. Weaker investment was seen in both machinery and equipment as well as construction categories, which were affected by higher prices of construction materials.
Manufacturing production in March after seasonal adjustment contracted 0.1% from a 2.5% growth rate in the previous month.
"The deceleration of the economy in March compared with February was mainly affected by weakening internal demand given the higher cost of living, as fuel and food prices rose amid a soaring inflation rate," Mr Sakkapop said.
Headline inflation increased because of the prices of energy and prepared foods. Energy inflation was in line with the development of global oil prices, while food inflation was due to the higher cost of food ingredients, according to the central bank. The bank estimates the headline inflation rate could peak above 5% in the second to third quarters this year as a result of the government's moderation of diesel price subsidies.
The committee managing the Oil Fuel Fund approved raising the diesel price cap from 30 baht per litre to 32 baht on May 1.
However, Mr Sakkapop said the Thai economy has been supported by external demand from both exports and tourism.
In March, the value of merchandise exports after seasonal adjustment grew 18.9% from 16% in February, attributed to growth rates in several categories. Foreign tourist arrivals grew to 210,836 in March from 152,954 in February after the country's easing of inbound travel restrictions.
He said the Thai economy improved in the first quarter from the fourth quarter of 2021, mainly thanks to the export and tourism sectors, demonstrating that it remains on a path to recovery.