Questions remain over outlook
With the year-long mourning period having come to an end, analysts wonder how much brighter Thailand's economic prospects will be for the upcoming holiday season.
As Thais paid their last respects to late King Bhumibol last Thursday at the royal cremation ceremony, many are asking if there will be a surge in business and consumer sentiment during the last two months of the year.
Although the mourning period has come to an end, there are still concerns and uncertainties over economic conditions in this year's final quarter, with many analysts asking if last year's subdued growth after the late King's passing on Oct 13 will repeat itself.
Restrictions were put on entertainment and television for one month from mid-October to mid-November last year, while tourism and consumer spending was muted as the country grieved the passing of the world's longest-reigning monarch. No restrictions are in place at this time, but the sentiment among Thais poses a mixed bag for the final quarter's economic outlook.
Mixed views on consumption
A pickup in private consumption is expected to gather steam in the final two months, but the recovery is not expected at a fast clip as some fundamental factors remain weak, said Amonthep Chawla, head of research at CIMB Thai Bank.
The holiday season should help spur consumption to a certain degree, while a recent pickup in private investment should help boost employment and subsequently support consumer income and purchasing power in the last two months, he said.
Despite these encouraging factors, a decline in income indicators for both the farm and non-farm sectors could dent purchasing power and consumption sentiment for the remaining period of the year, said Mr Amonthep.
The economic recovery remains concentrated in certain sectors such as exports and tourism, which do not have a spillover effect on private consumption.
"As a result, we still do not expect economic growth for the remaining period of this year to match GDP growth in the first half," said Mr Amonthep.
In the first half, the economy grew by 3.5% year-on-year, mainly due to buoyant exports and robust tourism.
Charl Kengchon, managing director of Kasikorn Research Center, is more optimistic, saying that business activities and marketing campaigns are expected to pick up at a brisk pace in November and December, coinciding with the festive season.
Normally, the final quarter is associated with shopping and tourism, while an acceleration in the government's budget disbursement during the first quarter of this fiscal year, along with strong export growth, will be other factors propelling the economic engine, said Mr Charl.
The Thai Bankers' Association predicts Thailand's export growth will reach 6.3% this year, with full-year GDP growth predicted at 3.7%.
Merchandise exports surged for a seventh straight month in September, jumping 12.2% year-on-year to a record high of US$21.8 billion (725 billion baht). For the nine months to September, outbound shipments soared 9.3% year-on-year.
But Mr Charl said the flood situation needs to be monitored as the water level at several dams nationwide continues rising.
The inundation is ravaging agricultural areas and will take a toll on farm income, but the magnitude is not expected to be as severe as the flooding disaster that occurred in 2011, he said.
With the stronger-than-expected export growth, the government and private sector have bumped up their economic growth forecasts for this year. The Bank of Thailand's Monetary Policy Committee in late September raised its GDP growth forecast for both this year and next to 3.8%, up from the 3.5% and 3.7% predicted in July, respectively.
The Fiscal Policy Office is also set to raise its forecast for economic growth this week from 3.6%.
As Bangkok is a regional shopping hub, the 3.3-trillion-baht retail industry is forecast to be much more active in the last two months, with heavy promotions and marketing events set to rejuvenate the spending spree, according to industry veterans.
Executives from major retail operators including Central Group, Robinson Plc and The Mall Group believe consumer purchasing power will slightly improve and accelerate in November and December.
Apart from New Year hampers and other presents, which are perennially best-sellers, fashion items are anticipated to command huge demand.
"The shopping atmosphere in the upcoming festive season will be better but the competition will be more intense than ever because almost all retailers will jump on the promotional bandwagon,'' said Anawat Sangkasap, senior vice-president for customer strategy at Robinson Plc.
For Robinson, the company plans to allocate 100 million baht on its promotions and other activities during the last two months. The main campaigns will focus on travel and leisure in November and gifts in December.
"We expect to see clear spending power improvements in Thailand's fashion market because consumers had stopped buying colourful clothing for a year,'' said Wallaya Chirathivat, senior executive vice-president of Central Pattana Plc (CPN), the SET-listed property and retail developer.
Although many businesses and tourist attractions were asked to tone down their activities over the past month for the late King's royal cremation ceremony, the Tourism Ministry expects foreign visitors to return to the country during the last two months, while locals will travel across the country to celebrate the beginning of the New Year.
The high tourism season will begin next month, with the royal cremation ceremony having concluded in October, said Tourism and Sports Minister Kobkarn Wattanavrangkul.
"The ministry and tourism authorities have prepared measures to deal with the peak season. Many attractions will be crowded with tourists after the royal cremation period," said Mrs Kobkarn.
The ministry is confident that the country will achieve total tourism income of 2.7 trillion baht as projected for this year. Of that revenue, 1.8 trillion baht will come from international markets and 900 billion from the domestic market.
From Jan 1 to Oct 11, 26.9 million tourists travelled to Thailand, generating income of 1.37 trillion baht, an increase of 5.6% year-on-year for tourist arrivals and 7.6% year-on-year for tourism income. China remained the top source country for international arrivals with 7.63 million visitors.
Upbeat Year-End Prospects
The Thai economy is expected to be brighter in the fourth quarter and should provide greater momentum for the country to grow further next year, said Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce (UTCC).
"Export growth is expected to lend support to all supply chains in the production and manufacturing systems, including small and medium-sized enterprises," said Mr Thanavath.
Besides, better revenue from several companies will lead to additional income and bonuses by the end of the year, which should spur spending, he said.
Mr Thanavath also expects more revenue to be generated by the tourism industry in the last quarter.
"The Thai economy should gradually get better and better on every level, ranging from rural workers to the middle class and large enterprises," he said.
The government's state welfare projects are also expected to help cut the cost of living for low-income earners, allowing them to have more money for spending during the year-end celebrations, said Mr Thanavath.
After a year-long mourning period, Thailand is expected to get back on its feet for the annual celebrations, encouraging people to spend and boosting the economy as a result, said Kalin Sarasin, chairman of the Thai Chamber of Commerce (TCC).
"With everything getting better, I expect a rising employment rate and more confidence among investors, leading to new spending next year," said Mr Kalin.
The TCC and the Federation of Thai Industries are expected to discuss seeking additional measures to help SMEs, he said.
"We are working on aiding SMEs to see what exactly they need. We will not only give them financial aid as we have done in the past, but will offer help in every other regard, including logistics, distribution strategies and marketing," said Mr Kalin.
But there could be some external risks, such as geopolitical tensions between the US and North Korea, which should be closely monitored, he said, adding that no internal risk derailing Thailand's economic recovery is expected, as the year-end celebrations should rev up consumer spending.
For the property sector, many developers are adopting a wait-and-see approach to assess their investments. Project postponement is a risk-off option that property developers can undertake amid mixed views on the economic outlook.
Kittipol Pramoj Na Ayudhya, managing director of SET-listed developer Sammakorn Plc, said the company plans to launch a new townhouse project worth 1 billion baht with 200 units priced from 2.5 million in the Chaiyaphruk area next month.
But the company may postpone the launch to early next year as the momentum in November may not be good enough to generate pre-sales despite how some customers visited the site.
"We will monitor the market situation in November before launching the project as there are two sides to the economic outlook. Some said it will be good, others view it as poor," he said.
Surachet Kongcheep, associate director at the research department of the property consultant Colliers International Thailand, said 5,000 units of new condominium supply worth 15 billion baht are set to be launched in Bangkok during the final two months of this year.
"This amount may be lower than expected as it depends on market sentiment in November," he said. "Many developers are in a wait-and-see mode. If they are not confident in the final two months, they may postpone their launches to early next year."