Songkran drives up industrial sentiment
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Songkran drives up industrial sentiment

High interest rates top the list of concerns for members, says Federation of Thai Industries

People enjoy a Songkran water festival event at a shopping mall on Wednesday. (Photo: Varuth Hirunyatheb
People enjoy a Songkran water festival event at a shopping mall on Wednesday. (Photo: Varuth Hirunyatheb

The Thai Industry Sentiment Index (TISI) rose to 92.4 points in March, driven by more goods production ahead of the Songkran festival and growing domestic demand for durable goods, according to the Federation of Thai Industries (FTI).

The indicator, which gauges business confidence as well as concerns of factory operators, stood at 90 points in February, a drop from 90.6 in January, as people were cautious about spending amid high household debt.

In March, production volume, goods orders and sales increased, resulting in more purchases of certain products, especially air conditioners, and “artificial demand,” said FTI chairman Kriengkrai Thiennukul.

“Manufacturers produced more to stock up on goods for delivery in April. This is needed because many workers may be still on vacation, not coming back to work after Songkran,” he said.

“This artificial demand occurs before the festival every year.”

The Thai traditional New Year officially runs from April 13-15 but the government has approved a five-day holiday from April 12-16.

The increase in the March sentiment index was also attributed to people buying more household appliances and furniture.

“Air conditioners enjoyed very good sales because the weather is so hot this year,” said Mr Kriengkrai.

More foreign tourist arrivals as a result of expanded visa-free policies and better exports also drove up the index, he added.

“Tourism acts as a direct injection of money into the economy through tourists’ spending and more employment,” he said.

Exports also improved in March, attributed to better economic conditions in Thailand’s trading partners, notably the US, India and Australia.

Official trade figures for March have not yet been released by the Ministry of Commerce. The dollar value of exports rose 3.6% in February from a year earlier, slightly below economists’ forecasts of 4.4% in a Reuters survey.

The economy in the United States is getting stronger even though inflation remains high, said Mr Kriengkrai. This may cause the US Federal Reserve to hold interest rates steady, he said, though the Fed is expected to make and adjustment in the second half of this year.

The March TISI was based on a survey of 1,336 entrepreneurs across 46 industry clubs under the FTI. High loan interest rates were at the top of their list of growing concerns, mentioned by 75% of respondents, followed by high oil prices (55.8%) and the sluggish economy in the country (50.2%).

On April 10, the Bank of Thailand kept its policy interest rate at 2.5%, the highest level in a decade. The decision drew renewed criticism from Prime Minister Srettha Thavisin, who said the country needed a rate cut as the economy remains sluggish.

Most FTI members are small and medium-sized enterprises and high loan interest rates mean they must shoulder higher financial costs.

The federation earlier asked the central bank to better regulate commercial banks’ interest rates and come up with new measures to set an appropriate net interest rate spread, the difference between loan and deposit rates.

“The spread between loan and deposit rates set my major banks are currently very high,” said Montri Mahaplerkpong, vice-chairman of the FTI.

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