Consumer confidence rose for a fifth consecutive month in December, reaching the highest level in 46 months since March 2020, propped up by government measures to reduce electricity and fuel prices.
The University of the Thai Chamber of Commerce (UTCC) reported yesterday the consumer confidence index rose to 62.0 in December, up from 60.9 in November, 60.2 in October, 58.7 in September, 56.9 in August and 55.6 in July.
"The consecutive improvements in consumer confidence are attributed to the formation of the government and state policies to reduce the cost of living, including electricity and fuel subsidies. Consumers also perceive greater political stability, leading to increased confidence," said Thanavath Phonvichai, president of the UTCC.
Despite the positive trend, Mr Thanavath said consumers remain concerned about the global economy, the lingering war in the Middle East, and elevated global interest rates to address inflation. These factors may exert additional pressure on the global economic recovery, hindering Thai exports and affecting consumer purchasing power, he said.
According to Mr Thanavath, consumer confidence remains below the fulcrum of 100, indicating lingering uncertainties about the economy, job opportunities and future income.
People are concerned about the political situation in Thailand, energy prices and the cost of living, which remains relatively high, and global economic risks that may negatively affect the recovery pace of the Thai economy and employment.
The ongoing conflicts in Ukraine and Gaza may be prolonged and adversely affect sentiment, potentially dampening domestic tourism, exports, general business and future employment opportunities, he said.
"Despite such challenges, the gradual improvement in consumer confidence, particularly driven by political stability, suggests there is potential for a sustained increase in the future," said Mr Thanavath.
"The government's ability to stimulate the Thai economy for a rapid recovery in 2024 is crucial. Moreover, concerns about differentials of deposit and loan rates need to be addressed. Thailand's policy interest rate of 2.5% is considered balanced -- higher than the inflation rate and aligned with deposit rates of 0.50-1% and long-term savings and bond interest rates of 3%. It is deemed an appropriate interest rate for the country's stability."
He said if the US Federal Reserve decides to lower its interest rates, the Bank of Thailand may adjust its policy rates accordingly.
In a related development, the university also released the TCC Confidence Index, which gauges the sentiment of the business sector and chamber members in every province.
The index dropped for the third consecutive month in December to 54.7 as the business sector remains worried about the Israel-Hamas conflict, future risks such as drought, PM2.5 pollution, flooding in the southern region, lack of flexibility, and delays in the budget disbursement for fiscal 2024.