Consumer sentiment improving
Consumer confidence picked up for the second straight month in July, boosted by improved business activities following the continued easing of Covid-19 control measures.
The University of the Thai Chamber of Commerce (UTCC) reported yesterday the consumer confidence index rose to 42.4 in July from 41.6 in June. It stood at 40.2 in May 40.7 in April, 42 in March, 43.3 in February and 44.8 in January.
An index lower than 100 points reflects weak purchasing power based on a slow economic recovery.
Thanavath Phonvichai, president of the UTCC, said following the improved Covid-19 situation and the easing of Covid-19 curbs by the government, businesses have resumed their normal activities and foreign tourists have returned to Thailand. Overall, consumers felt economic conditions had started to pick up slightly, he said.
Recovering consumer sentiment was also buoyed by the latest economic growth forecast by the Fiscal Policy Office (FPO), lower retail gasohol 91 (E10) and gasohol Octane 95 (E10), export growth, the SET Index rise and an increase in prices of many key farm products, he said.
The FPO on July 26 kept its forecast for economic growth this year at an average of 3.5%, underpinned by a recovery in both the tourism sector and domestic consumption.
The state agency has also revised upward its projection of the number of foreign tourist arrivals this year to 8 million, up from the prediction of 6.5 million made in April.
Last year the number of foreign arrivals stood at around 400,000.
The FPO expects export value to expand 7.7% year-on-year this year, higher than its April forecast of 6%, despite the impact of the Russia-Ukraine war.
According to the Commerce Ministry's latest data, the customs-cleared value of Thai exports continued to expand for 16 consecutive months in June, with a growth rate of 11.9% from June last year to US$26.5 billion (907 billion baht).
A major contribution was the export of agricultural and agro-industrial products, which reflected Thailand's ability to supply food products to the global market. At the same time, exports of industrial products grew in line with world production.
For the first half of 2022, exports expanded by 12.7% to $149 billion while imports rose by 21% to $155 billion, resulting in a trade deficit of $6.25 billion.
Mr Thanavath said consumers are expected to return to active spending in the late third quarter of this year as the economy gains more steam.
The university expects the economy to grow 3.0% to 3.5% this year, with an inflation rate at 6-6.5%, export growth at 6-8% and foreign tourist arrivals expected at 8-10 million, said Mr Thanavath.
According to Mr Thanavath, the Bank of Thailand is expected to raise the benchmark interest rate by 25 basis points at each of the two remaining meetings this year, taking the rate to 1.25% this year.
On Wednesday, the central bank raised its key interest rate for the first time in nearly four years by 25 basis points from 0.50% to 0.75%, effective immediately, in an effort to wrestle control over surging inflation as the economic recovery gains momentum.
The policy rate had been kept at a record low of 0.50% since May 2020.
The central bank's rate hike is unlikely to have a big impact on the economy this year as commercial banks will not rush to raise their interest rates, while the state-owned banks have capped their lending rates until the year-end, he said.