Retail sentiment in the third quarter is expected to remain bearish because of political challenges, according to the Thai Retailers Association (TRA).
Chatrchai Toungratanaphan, vice-president of the TRA, said the association expects retail sentiment, as gauged by the Retail Sentiment Index, from July to September to remain flat because of rising uncertainty about the formation of the government and the new administration's economic policies, which may require significant adjustments from the business sector.
The association expects the index to stay in a range of 47-50 points from July to September.
The index, which is prepared monthly by the TRA and the Bank of Thailand, dropped to 47 points in June, falling below the average level of 50 for the first time in 15 months.
The reading fell from 53 points in May, 60 points in April, 51 points in March, 53 points in February and 62 points in January.
According to Mr Chatrchai, the decline was evident in various components of the index, including same-store sales growth, spending per bill or per basket size, and shopping frequency. These indicators reflect the weakened purchasing power of lower-income consumers.
He attributed the decline to several negative factors including the delayed formation of a new government, the high cost of living and high level of household debt, a sluggish economy, the expiration of government stimulus measures, the government's delay in disbursing funds as the country awaits a new administration, and the low season for tourism.
Mr Chatrchai said the index fell across most categories, highlighting the ongoing challenges faced by the retail industry, though Thailand did record 12.4 million foreign arrivals in the first half of the year.
"Consumer confidence declined across most retail categories, except for supermarkets and convenience stores, as consumers are still willing to spend on necessary or promotional items to reduce their cost of living," he said.
"The prospects for Thailand's retail industry are not as optimistic as expected in the first half of the year because of high costs such as energy and public utilities, combined with weak consumer demand."
In an effort to stimulate retail sentiment, the TRA proposed a new government be quickly established, allocating budgetary expenditure by implementing targeted and streamlined economic stimulus measures.
These measures include increasing purchasing power for lower-income consumers and promoting spending among high-potential consumer groups, while simplifying procedures for easier accessibility.
The new government is also advised to promote tourism to attract foreign and domestic travellers, said the association.
Travel could be promoted by extending the duration for visas on arrival for foreign visitors, increasing flight frequencies to Thailand, and focusing on building confidence in terms of tourist safety and security, said the TRA.