Service sector, tourism redeeming features in Thailand’s slow growth in Feb


March 30, 2024

The Thai economy expanded at a slow pace in February but the performance of the service sector, which saw a large improvement in both the number of tourists and tourism revenue, was a silver lining.

The Bank of Thailand (BOT) released its monthly economic outlook on Friday.

The central bank said private investment and manufacturing production also improved in some sectors, while private consumption remained stable. However, the value of merchandise exports, excluding gold, declined from the previous month by 2.9% as exports of several industries remained sluggish. This is a result of a subdued recovery in global demand, a high level of inventory, as well as Thailand’s structural factors, the BOT said.

Public spending, excluding transfer payments, contracted from the same period last year from lower capital expenditure due to the delay in the passing of the fiscal year 2024 budget. Current expenditure by the central government also was lower due to the high base last year from the advance disbursement to educational agencies together with disbursement related to electricity cost reduction measures as well as tourism stimulus projects. Investments by state-owned enterprises also contracted due to the high base last year from disbursements for transportation projects.

Headline inflation saw lower contraction due to higher energy prices, as petrol prices rose with global crude oil prices. Meanwhile, core inflation increased slightly from the high base effect of prepared food last year despite a month-on-month increase in some items such as non-alcoholic beverages and food away from home category.

The labour market remained stable whereby lower manufacturing employment was offset by higher employment in the service sector, the BOT said, adding that the current account registered a surplus mainly due to a surplus in trade balance.

In terms of private sector financing, funding from business credits, corporate bonds, and equity showed an increase over the previous month. They were used for working capital, business expansion and debt repayment.

The baht showed a tendency to depreciate against the US dollar as the market had adjusted expectations of a delay in the lowering of the key interest rate by the US Federal Reserve after US economic data was better than expected, while the Thai economic performance was weaker than expected.

The central bank said foreign arrivals and tourism revenue, after seasonal adjustment, continued to increase in February, especially the number of tourists from China, Malaysia, and Japan.

The rise in Chinese arrivals was due to the exemption of visa requirements and the Chinese New Year festival, while Malaysian tourists were also travelling more before fasting activities in the Ramadan period. Meanwhile, Japanese arrivals in February picked up after the previous slow down, together with a long holiday period in Japan.

Source: The Nation