Business

Thai consumption, investment dip but hopes high

Automobile purchases in Thailand remained at an exceptionally high level as car manufacturers continued to work at full capacity to meet a backlog of orders. — Reuters picAutomobile purchases in Thailand remained at an exceptionally high level as car manufacturers continued to work at full capacity to meet a backlog of orders. — Reuters picBANGKOK, Jan 31 — Private investment and consumption in Thailand slipped in December from November after strong growth in previous months, but economic fundamentals remained sound and confidence was growing among consumers and companies, the central bank said.

Investment fell 0.8 per cent in December from November but the central bank said that was because investment in machinery and equipment had been so heavy in previous months when industry was re-equipping after bad floods in late 2011.

Reflecting the disruption in December 2011, investment was 28.2 per cent higher than a year earlier.

Today’s data also showed that consumption dropped 2.9 per cent in December from November, in line with a decline in imports of consumer goods and automobile purchases, it said.

But it stressed that automobile purchases remained at an exceptionally high level as car manufacturers continued to work at full capacity to meet a backlog of orders.

“A drop in consumption and investment data is not a worry because it’s probably a slowdown from the pressing need after flooding in late 2011. But exports and tourism continued to improve,” said Thammarat Kittisiripat, a TMB Bank economist.

“We believe economic growth will be more broad-based than last year, which is good,” he added.

Businesses are also banking on strong domestic demand and government spending projects.

“Infrastructure investments will be the major driver boosting domestic cement demand this year,” said Kan Trakulhoon, chief executive of Thailand’s biggest industrial conglomerate, Siam Cement Pcl.

‘EXCEPTIONAL’ CEMENT DEMAND

“The first quarter is normally the low season for the cement sector. But we are seeing exceptionally strong demand in the first quarter this year and we expect the trend to continue the whole year,” he said after results yesterday.

Central bank data showed exports fell in December from November, reflecting weak global demand, but they rose 13.6 per cent from a year earlier, when the floods hit shipments.

The central bank has forecast exports — which are equal each year to more than 60 per cent of the economy — to increase 9 per cent this year, with shipments likely to rebound in the second half.

It recently raised its 2013 economic growth forecast to 4.9 per cent from 4.7 per cent, citing stronger-than-expected private investment.

The central bank’s monetary policy committee (MPC) left its benchmark rate unchanged at 2.75 per cent for a second straight meeting on January 9.

Most economists expect the rate to be left on hold for some months as domestic demand remains strong, while inflation is not seen as a problem. The next policy review is on February 20.

Thai Finance Minister Kittirat Na Ranong repeated his view today that interest rates were too high but said it was the job of the central bank to decide on the level.

But Bank of Thailand Governor Prasarn Trairatvorakul, speaking to reporters at a separate function, said the policy rate must reflect the country’s economic fundamentals.

He also reiterated that a prolonged period of low interest rates could lead to financial imbalances. — Reuters

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