Philippines

MonthlyEconomic

THAILANDMONTHLYECONOMICMONITOR|1

PublicDisclosureAuthorizedPublicDisclosureAuthorized

120

100

80

60

40

20

0

ThailandMonthlyEconomicMonitor

20September2023

Theeconomymaintainedagradualrecovery,ledbyprivateconsumption.Weakglobaldemandcontinuedtoexertdownwardpressureongoodsexportsandisbeginningtoimpedethetourismrecovery.Inflationremainedsignificantlybelowpeerswithenergysubsidiescontainingthepressureonlivingcostsandsupportingprivateconsumption.Forthcomingenergysubsidiesandstimulusplansareexpectedtoprovideashort-termboosttoeconomicgrowthbutwouldlikelydelayfiscalconsolidation.InAugust,thenominaleffectiveexchangerateappreciatedduetooptimismregardingformationofthenewgovernment,despitethecurrentaccountdeficitandportfoliooutflows.

Privateconsumptionremainedrobust,buoyedbyastronglabormarketandthegradualtourismrecovery(Fig.1).

However,tourismarrivalsdeclinedslightlyinJuly,withfiguresreaching77percentoftheirpre-pandemiclevels,downfrom80percentthepreviousmonth(Fig.2).WhilethenumberofChinesevisitorsincreased,touristarrivalsfromEurope(excludingRussia),India,andASEANcountries,particularlyMalaysiaandSingapore,havedeclined.Additionally,travelrevenueperpersonpertripremained18percentlowerthanpre-pandemiclevels.

Goodsexportscontinuedtodecline,drivenbyacontractioninbothmanufacturingandagriculturalexports.InJuly,goodsexportsshrankby5.5percent(year-on-year),markingtenconsecutivemonthsofcontraction.Nonetheless,thiscontractionwasthesecondsmallestamongmajorASEANexportersafterthePhilippines.Manufacturingexportsdeclinedsharply,duetothecontractionsinagro-manufacturingproducts,electronics,andpetroleumproducts.Agriculturalexportscontractedforthesecondconsecutivemonth,fallingby6.0percent.ExportstoChinaandASEANweakenednotably,whereasexportstotheUSimproved(Fig.3).However,theAugustManufacturingPurchasingIndex(PMI)indicatesamoreoptimisticoutlookforexportstoChinaevenastheglobalPMIcontinuedtocontract(Fig.4).

TheoutlookforForeignDirectInvestment(FDI)hasbeenbolsteredbytheeconomicrecoveryandinvestmentpromotionefforts.InQ12023,netFDIinflowsstoodat1.5percentofGDP,adeclinefrom4.4percentofGDPthesameperiodlastyear.However,duringthefirsthalfof2023,FDIapplicationsindicatedstrongerfutureFDIinflows.Thevalueoftheseapplicationsincreased141percent(year-on-year),whichaccountingfor7percentofGDP.Thisgrowthisprimarilyattributedtoheightenedinvestmentinterestintargetedindustries,particularlyelectronics,foodprocessingandtheautomotivesector,especiallyintheelectricvehicles(EV)supplychain.Theuptickinapplicationsinelectricalappliancesandelectronics(E&E)industrypartlystemmedfromongoing

Figure1:GoodsExportsWeighedonManufacturing

Production

(Percentyear-on-year)

50.0

ManufacturingProductionIndexPrivateConsumptionIndex

GoodsExports

25.0

0.0

-25.0

Jan-21Jan-22Jan-23

Source:HaverAnalytics,CEIC;WorldBankstaffcalculations.

Figure2:TourismRecoverySlowedinJuly

(Touristarrivals,percentofthe2019level,seasonallyadjusted)

May-23

Jun-23

Mar-23

Feb-23

Jul-23

Apr-23

98.7

77.0

86.4

43.8

TotalChina(28%)ASEAN(27%)Europe(17%)

Source:CEIC;WorldBankstaffcalculations.

Figure3:ExportsContinuedtoContract

(PercentYearonYear,3monthsmovingaverage)

Japan

60

Total

ASEAN

UnitedStates

EU27

China

40

20

0

-20

-40

Jan-21Jul-21Jan-22Jul-22Jan-23Jul-23

THAILANDMONTHLYECONOMICMONITOR|2

relocationofsupplychainstoreduceriskassociatedwithtradetensions.

InflationremainsverylowwhileincreasingslightlyinAugust,drivenbyrisingenergyandfoodprices.InAugust,headlineinflationincreasedto0.9percent(year-on-year),upfrom0.4percentthepreviousmonth(Fig.5).However,amongemergingmarkets,Thailand'sinflationrateremainedthesecondlowestafterChina,duetodecliningenergypricesandlimitedtransmissionofproducerpricestoconsumerprices.Meanwhile,coreinflationcontinuedtodecrease,reaching0.8percent.Incontrast,theenergypricesroseforthefirsttimeinthreemonths,followingthehigherglobalcrudeoilprices.Lookingahead,pressureondomesticenergypricesisexpectedtoreduce,reflectingareductioninelectricitypricesfromTHB4.7perunittoTHB3.99perunit,startingSeptember.However,freshfoodpricesarelikelytoriseduetoElNi?o.InthefirstweekofSeptember,thepriceofwhitericesurgedtoitshighestlevelinoverthreeyears,amidincreasedricehoardingoverconcernsofdrought.

Fiscalconsolidationhasbeenprogressingslowly,primarilyduetopersistentenergysubsidies.Inthefirsttenmonthsoffiscalyear2023(October2022-July2023),thecentralgovernment'sfiscaldeficitdecreasedto4.3percentofGDP,comparedto6.2percentinthesameperiodlastyear(Fig.6).Thisreductionwasattributedtoacombinationofreducedtotalexpenditureandincreasedrevenue,withtaxrevenuereachingitshighestlevelsince2019.Publicdebtremainedstableat61.7percentofGDPasofJuly.Theimplementationofenergysubsidies,includingcapsondieseloil,cookinggas,andelectricityprices,helpedalleviatelivingcostsbutalsoslowedthepaceofconsolidation.AsofAugust13,theStateOilFunddeficitwidenedtoTHB59.1billion(0.4percentofGDP).Thismarkedthelargestdeficitinfourmonths,attributedtotheincreasedcostofthedieselpricesubsidy,drivenbytherisingglobaloilprices(Fig.7).

Thenewlyformedgovernmenthasunveiledeconomicstimulusplansthatareexpectedtocomeatasignificantfiscalcost.Thepolicyprioritiesfocusonimplementingshort-termmeasuresaimedatstimulatinghouseholdspending.Thesemeasuresincludeprovidingaone-timetransferofTHB10,000(US$286)viadigitalwalletstoindividualsaged16andabove,reducingthecostoflivingfurtherthroughadditionalcutsonenergyprices,andsuspendingdebtrepaymentsforfarmers,SMEs,andindividualsforthreeyears.Additionally,thegovernmentisfocusedoneffortstoenhancetourismrevenueandrestoretravelerconfidence,withpolicyprioritiessuchasimplementingavisa-freepolicyforChineseandKazakhstanvisitors.Thesepoliciesareexpectedtohaveapositiveimpactonshort-termeconomicactivitybyboostingprivateconsumptionspendingandstrengtheningtheeconomicrecovery.However,someofthesepolicieswillincursubstantialfiscalcosts,most

Source:HaverAnalytics;WorldBankstaffcalculations.

Figure4:ManufacturingPMIContractedAmongMajorTradingPartners,butExpandedinChina

(DiffusionIndex)

70

65

60

55

50

45

40

35

30

ManufacturingPMI:Global

______USISM

/Eurozone

______China

Jan-20Jan-21Jan-22Jan-23

Source:CEIC;WorldBankstaffcalculations.

Figure5:InflationRemainedtheLowestinASEAN

(PercentYear-on-Year)

Indonesia——Malaysia

PhilippinesThailand

10.0

8.0

6.0

4.0

2.0

0.0

-2.0

-4.0

Jan-18Jan-19Jan-20Jan-21Jan-22Jan-23

Source:CEIC;WorldBankstaffcalculations.

Figure6:TheFiscalDeficitNarrowedbutRemainedAbovethePre-PandemicPeriod

(PercentofGDP)

10

0

-10

-20

______FY2017-19______FY2022FY2023

-30

OctNovDecJanFebMarAprMayJunJulAugSep

Source:HaverAnalytics;WorldBankstaffcalculations

Figure7:TheStateOilFundDeficitWidenedAgain

(THBbillion)

27.5

60

30

0

-4.5

-30

-59.1

-60

LPGOil

Total

-90

-120

-125.2

-150

Jan-20Jul-20Jan-21Jul-21Jan-22Jul-22Jan-23Jul-23

Note:NumberinAugustwasasofSeptember10,2023

Source:OilFuelFundOffice(OFFO);WorldBankstaffcalculations.

THAILANDMONTHLYECONOMICMONITOR|3

notablythedigitalwalletwhichisestimatedtocostTHB560billion(3.0percentofGDP).

Thecurrentaccountturnednegativemainlyduetothenarrowinggoodstradebalance.InJuly,thecurrentaccountrecordedadeficitof1.1percentofGDP,reflectingadiminishedgoodstradesurplusanddeeperdeficitsinservices,primaryandsecondaryincome(Fig.8).Overall,duringthefirstsevenmonthsof2023,thecurrentaccountsawasmallsurplusofTHB1.1billionor0.4percenttoGDP.InAugust,theNominalEffectiveExchangeRate(NEER)appreciatedslightlyby0.45percent.Thisappreciationwasattributedtoheightenedpoliticaloptimismfollowingincreasedclarityinthepoliticalsituation,despitethecurrentaccountdeficitandportfoliooutflowsobservedinbothdebtandequitymarkets.

Figure8:TheCurrentAccountBalanceTurnedNegativeinJuly

(USDmillion)

BOP:USD:TradeBalance

BOP:USD:Services,PrimaryIncome&SecondaryIncome

BOP:USD:CurrentAccountBalance

8000

6000

4000

2000

0

-2000

-4000

-6000

Jan-20Jul-20Jan-21Jul-21Jan-22Jul-22Jan-23Jul-2

Source:CEIC;WorldBankstaffcalculations

.

NewsHighlights:

?ThegovernmentistargetingannualGDPgrowthofatleast5percent.(BangkokPost,

Link).

?PrimeMinister’spolicystatementhighlightsdebt,energycosts,digitalhandout.(BangkokPost

,Link).

?Thairicepricesurgesamidstdroughtconcerns.(The

Nation,Link).

IssuestoWatch:

?Tourism:WillChinesetouristsrecoverasfastasprojectedin2023?

?Inflation:Willinflationcontinuetodecline,despiteelevateddemand?

?Politics:Howlongwillthegovernmenttransitionprocesstake,andwillitleadtosubstantialdelaytothebudgetdisbursementinFY24(Oct23toSep24)?

PreparedbyWarunthornPuthong,undertheguidanceofKiatipongAriyapruchyaandEkaterineT.Vashakmadze.Forfurtherquestions,pleaseemail

wputhong@

THAILANDMONTHLYECONOMICMONITOR|4

SelectedEconomicandFinancialIndicators

2022

2022

2023

2023

Q3

Q4

Q1

Q2

Apr

May

Jun

Jul

Aug

GDPandInflation(%YoY)

GDPgrowth(real)

ContributiontoGDPgrowth:

Privateconsumption

GeneralGovernmentconsumption

Grossfixedcapitalformulation:PrivateGrossfixedcapitalformulation:PublicNetExportsofgoodsandservices

ChangeinInventory

Residualanderrors

GDP,nominal(USDBillion)

GDP,nominal(THBBillion)

ConsumerPricesIndex:Headline

ConsumerPricesIndex:Core

2.6

3.4

0.0

0.9

-0.3

1.8

-0.6

-2.6

496

17,3706.1

2.5

4.6

5.2

-0.3

1.9

-0.5

-0.8

1.7

-2.6

119

4,337

7.3

3.1

1.4

2.9

-1.2

0.8

0.1

2.7

-1.3

-2.7

125

4,533

5.8

3.2

2.61.8

2.7

1.6

0.5

1.5

0.2

1.3

0.4

0.8

0.9

0.8

3.1

-0.9

0.5

0.3

2.0

-0.2

-2.1

133

4,519

3.9

2.2

4.6

-0.7

0.2

-0.1

2.3

-1.7

-2.8

125.7

4,330

1.1

1.5

OutputIndicators

ManufacturingProductionIndex(%YoY)

0.6

7.9-6.0

-3.7-5.6

-8.7

-3.0

-5.0

-4.4

CapacityUtilisation(%)

62.8

62.860.3

63.857.7

53.6

60.3

59.2

58.2

FarmProductionIndex(%YoY)

2.1

-1.61.7

4.10.9

7.3

-5.5

1.0

2.7

ServiceIndex(%YoY)

12.8

16.312.6

13.49.6

9.5

10.5

8.9

10.5

LaborMarket

Unemployedworkers(ThousandPersons)

527.0

491.4462.5

421.1429.1

Unemploymentrate(%)

1.3

1.21.2

1.11.1

Underemployment/1(ThousandPersons)

273

235275.9

227.9202.6

Underemployment(%)

0.7

0.60.7

0.60.5

BalanceofPayments(USDmillion)

Currentaccount

-14,706

-7,0281,567

3,469-1,899

-581

-2,766

1,449

-445

Currentaccount(%ofGDP)

-3.0

-5.91.3

2.6-1.5

-1.4

-6.6

3.5

-1.1

TradeBalance

13,543

-9184,180

2,9452,153

80

55

2,018

355

Exportsofgoods(%YoY)

5.7

6.5-7.5

-4.5-5.6

-4.9

-5.9

-5.9

-5.5

Importsofgoods(%YoY)

14.3

21.4-2.3

2.0-5.0

-3.6

-1.9

-9.3

-12.0

Service,primaryandsecondaryIncome

-28,249

-6,111-2,613

524-4,051

-662

-2,821

-569

-800

TouristArrivals(ThousandPersons)

9,971

2,4255,465

6,4786,437

2,182

2,014

2,241

2,491

Financialaccount

3,168

-3,4963108.6

-2454.1-

Financialaccount(%ofGDP)

2.3

-2.92.5

-1.8-

ForeigndirectInvestment,net

2,607

87918.0

-843.1-

Portfolioflows

5,768

-7561963.4

-5860.5-

OthersInvestments

-5,410

-3,225196.4

4129.8-

CentralGovernmentBudget(FiscalYear,THBbillion)/2

Revenue

2,992

833694

675938

261

307

370

244

Expenditure

3,845

9251,076

907912

264

257

392

287

CentralGovernmentbalance

-8