Consumer confidence in August improved after the swift formation of the new government, but people remain concerned about the high cost of living and the sluggish global economy.
The University of the Thai Chamber of Commerce (UTCC) reported on Thursday the consumer confidence index increased to 56.9 from 55.6 in July, marking an improvement after the first decline in the reading in 14 months in July attributed to mounting concerns about the delayed formation of a new government as well as political stability.
"Consumers started regaining confidence in the new government's ability to stimulate economic recovery, especially after the appointment of Srettha Thavisin as the 30th prime minister of Thailand. The overall political situation in Thailand appears to be stabilising as political divisions seem to be easing, leading to increased consumer confidence across the board," said Thanavath Phonvichai, president of the UTCC.
Despite the improvement, Mr Thanavath said the overall consumer confidence index still remains below 100, indicating that consumers view the economic recovery to be slow, while the high cost of living and rising interest rates have impacted domestic spending, tourism, exports, general business activities and job prospects, he said.
Mr Thanavath said consumers also remain concerned about the high cost of living, especially electricity bills, and the uncertain global economic situation.
Additionally, the upward adjustment of interest rates to combat inflation in various countries could exert additional pressure on global economic recovery, potentially leading to an economic downturn. This could have repercussions for exports and the purchasing power of consumers across all regions, he said.
However, Mr Thanavath noted the possibility for consumer confidence to steadily improve in the near future, particularly if the new government can quickly stimulate the economy with policies and measures as stated in their election campaign.
According to Mr Thanavath, the recently approved cuts in electricity and diesel prices are likely to help alleviate the cost of living for the public and reduce transportation costs for businesses, preventing a significant increase in inflation.
Such measures also help reduce pressure on the Bank of Thailand to adjust its policy rate, he said.
"This year, it is anticipated that the central bank may raise benchmark rates by another 0.25%, just once, to ensure that the actual interest rates remain positive. This will also help promote savings," said Mr Thanavath.
"The measures to reduce fuel and electricity costs, meanwhile, will help prevent a significant increase in inflation, which is beneficial for the cost of living for the public. Consequently, there won't be significant pressure for an interest rate hike, as inflation is not expected to rise significantly," said Mr Thanavath.
"It is estimated that these actions could further stimulate the economy in the fourth quarter, increasing it by an additional 1% from the normal level."