Consumer spending revival slow Risks still weighted to the downside as economy starts to emerge from lockdown

Consumer spending revival slow  Risks still weighted to the downside as economy starts to emerge from lockdown

Shoppers at Future Park Rangsit department store on Sept 7 after the CCSA’s easing of lockdown restrictions. (Photo: Apichit Jinakul)

We forecast real household spending in Thailand to post growth of 0.2% year-on-year in 2021, following a contraction estimated at 11.8% last year as a result of the Covid-19 pandemic and related lockdown measures.

Total household spending (in real terms) will reach 7.6 trillion baht this year — still 11.6% lower than the pre-pandemic figure of 8.6 trillion in 2019. While we believe that there will be an uptick in spending in the consumer and retail sector in 2022, with real household spending growing by 1.4%, growth levels will still lag the five-year historical average (2015-19) of 4.5%.

Retail sales in June, the last month for which figures are available, recorded the fifth consecutive month of year-on-year growth. However, the 14% rate reflected the low base effects of 2020, and in absolute value was still below the same period in 2019. Consumer confidence, meanwhile, reached a 23-year low in August, reflecting people’s worries about the impact of the third wave, lockdowns and the slow progress of vaccinations.

Consumer spending revival slow  Risks still weighted to the downside as economy starts to emerge from lockdown
Consumer spending revival slow  Risks still weighted to the downside as economy starts to emerge from lockdown

Our forecast for modest growth in real consumer spending in 2021 is in line with our country risk team’s forecast that the domestic economy will grow by a real rate of 1.9% year-on-year, compared with a contraction of 6.1% in 2020. The main driver of economic growth is the rebound in net exports, due to improving economic outlooks in the United States and Europe.

However, we note that risks in the GDP forecast are weighted to the downside. Further virus outbreaks would weigh on domestic demand and ultimately private investment. Moreover, the recovery in tourism would be non-existent and we could see greater social unrest as the employment outlook weakens.

As a result, retail sales may stay under more pressure and for longer than we have currently factored into our forecasts.

INFLATION OUTLOOK

Inflationary pressures are rising this year in many countries globally as low-base effects, higher commodity prices and supply-chain challenges create localised shortages. As such, we believe a rising consumer price index (CPI) is a key risk to consumer spending over the remainder of 2021, as it has the potential to erode purchasing power. The CPI in Thailand reached 3.4% year-on-year in April but has been declining since then, and was just 0.45% in July, partly reflecting government subsidies to ease people’s financial burden.

Our country risk team projects that inflation will average 1.0% for the full year, with the spike proving temporary while soft domestic demand, alongside spare capacity in the tourism sector, will keep inflation below or within the Bank of Thailand’s 1-3% target range over the coming quarters.

Government restrictions: Authorities on Sept 1 eased a number of restrictions in the hardest-hit provinces, with restaurants allowed to offer dining in with certain conditions, and most businesses in shopping malls reopening. However, a curfew remains in effect until the end of the month.

According to the Oxford Covid Government Response Tracker (a composite measure of the strictness of curbs in a country), Thailand’s restrictions remain moderate, with a Stringency Index score of 55.1 out of 100 (as of Sept 5). We believe, however, that restrictions will ease further as more Thais receive vaccines.

Government support measures: Stimulus measures that specifically support households and therefore shield consumer spending have included a fiscal package, totalling 1.5 trillion baht (9.6% of GDP), released in three phases. It included health-related spending, assistance for workers, farmers and entrepreneurs affected by Covid, support for individuals and businesses through soft loans and tax relief, lower utility bills, and social security contributions and measures to support local tourism.

In January this year, the government announced a series of measures, including a 210-billion-baht (1.3% of GDP) cash handout to counter the second wave of the outbreak. Some 30 million citizens, mostly informal sector workers and farmers, who had been hard hit by curbs on businesses and mobility, received 3,500 baht a month in February and March.

To combat hardship during the third wave that started in April, authorities approved disbursements of up to 3,000 baht per person for 31 million eligible citizens between July and December. As well, a royal decree allows the Ministry of Finance to borrow 500 billion baht (3.2% of GDP) to mitigate the social and economic impact of the prolonged pandemic.

On June 1, the government approved a new stimulus package worth 140 billion baht, consisting of cash handouts, co-payments and e-vouchers. All of the measures rolled out since 2020 have shielded consumers from a much tougher economic environment, and form the building blocks of our recovery view for the second half of 2021.

Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid infections and a decline in death rates. Both these factors will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

Thailand belatedly began its mass vaccination drive on June 7, with authorities aiming to inoculate 70% of residents by the end of the year to prepare the tourism-reliant country for a wider reopening next year. As of Sept 13, 40.1 million people or about 58% of the population had received at least one dose, with 12.3 million (18%) fully vaccinated. After a rocky start and problems with supplies, inoculations are gathering momentum with around 800,000 doses being administered daily.

Our forecasts take into account risks that are highly likely to play out in 2021, including the easing of government support.

Other risks include below-target vaccinations, low or disappointing vaccine efficacy and new variants of the coronavirus. These factors could lead to extension of existing restrictions or new curbs, resulting in depressed consumer spending and in a worst case, civil unrest.

Internet Explorer Channel Network
News Related

OTHER NEWS

Storyboard | A new name for Facebook Inc. Hot or not?  

Facebook. | Representative image Soon after news broke that Facebook Inc is looking to rebrand its eponymous social media platform, people began sharing their suggestions for a new name for ... Read more »

Chia Tai Home Garden launches new products and exciting deals

Chia Tai Home Garden by Chia Tai Group, Thailand's leading innovative agricultural company, launches two new products to satisfy home gardening lovers, namely, Bermuda Grass Seed and Common Wheat. Bermuda ... Read more »

Ascendas Reit to acquire 11 logistics properties in Kansas City for $207.8 million

SINGAPORE (THE BUSINESS TIMES) – Ascendas real estate investment trust (Reit) has proposed the acquisition of 11 logistic properties located in Kansas City in the United States for $207.8 million. ... Read more »

9,810 new Covid cases, 66 more deaths

A bus is seen packed with holidaymakers at the Mor Chit bus terminal on Thursday. Transport Company plans to serve 20,000 passengers during the long weekend starting on Thursday with ... Read more »

How companies like Crocs and Uber will continue to pay less tax under a new law

‘A shambles’ is what Professor of Tax Law Jan van de Streek of Leiden University calls the bill by outgoing State Secretary for Tax Affairs Hans Vijlbrief (D66), which aims ... Read more »

Supply-chain woes hitting social media as firms cut back on holiday advertising, says Snap

Shares of Snap tumbled more than 25 per cent in extended trading. SAN FRANCISCO (BLOOMBERG) – Snap warned on Thursday (Oct 21) that supply-chain bottlenecks are prompting companies to hold ... Read more »

Is it wrong to root for serial killers? Love is in the air in Season 3 of You, with much murder and mayhem in the mix

Victoria Pedretti and Penn Badgley as Love and Joe. NETFLIX After letting fans wait for two years, the long awaited third season of the psychological thriller series You has finally ... Read more »

PTTGC pledges to reduce its emissions Firm targets 20% decrease by 2030

The net-zero goal, which is also known as carbon neutrality, requires countries to strike a balance between emissions and absorption of carbon dioxide from the atmosphere. PTT Global Chemical Plc ... Read more »

Buffet on the Chao Phraya Lord Jim's offers the finest selection of Thai and Western dishes with great service to match

Vegan dinner menu is also available at Lord Jim’s. If the term “buffet” sounds like a mass-produced feast and the opposite of fine dining, Lord Jim's cuisine does not fit ... Read more »

Excitement builds among book lovers

Book lovers can buy online and at over 550 bookshops during ‘Book Expo Thailand’. photo courtesy of PUBAT This year, the long-running “Book Expo Thailand”, which is held every October, ... Read more »

Timely commissions Audemars Piguet Contemporary brings more art to the world

Ryoji Ikeda’s data-verse 3. Audemars Piguet's patronage of contemporary art is unquestionable since it has nurtured artistic exchanges and commissioned artworks presented at major venues including Art Basel and Venice ... Read more »

Production outlook improving

From January to September, domestic car production increased by 25.6% year-on-year to 1,211,946 units. The Federation of Thai Industries (FTI) expects car production to grow beyond the target of 1.6 ... Read more »

'Zero-trust security' on the rise Remote work economy lifts demand for IT security but many Asian companies must do more to upgrade, says Okta

The survey found that organisations in Asia Pacific prioritise zero-trust security more than their peers in other regions. The unprecedented mass migration of organisations' IT infrastructure to cloud and digital ... Read more »

Hawaii Welcomes Travelers Back Beginning November 1 Announcement comes about two months after tourists were asked to voluntarily postpone travel due to Covid-19 concerns

Hawaii will open itself to travelers in November, after being asked in August to postpone their trips. “Beginning Nov. 1, we want to invite and encourage fully vaccinated visitors and ... Read more »

BAAC to back farming-related startups

Bank for Agriculture and Agricultural Cooperatives (BAAC) will invest in promising startups in the farming sector, especially those which have boosted farmers' income, said the bank's executive vice-president Narong Khuntiviriyakul. ... Read more »

Three schemes set to welcome visitors

People walk pass a thermal screener at Don Mueang airport in Bangkok on Wednesday during a readiness inspection in preparation for the country’s reopening on Nov 1.  Pattarapong Chatpattarasill Thailand's ... Read more »

Cryptocurrencies a new issue for SEC Regulator to educate young investors

Cryptocurrencies have given rise to a new set of challenges for the Securities and Exchange Commission (SEC) as the recent price surge has lured numerous new investors to the market ... Read more »

BoT eases mortgage LTV ratio Move aims to boost property sector

The Bank of Thailand (BoT) has further eased the loan-to-value (LTV) ratio for mortgage lending to allow homebuyers to borrow loans of up to 100%, aiming to help boost the ... Read more »

Krungsri profit soars for first 9 months

A customer utilises passbook update services provided at a bank branch of Krungsri. Varuth Hirunyatheb Bank of Ayudhya (BAY), marketed under the brand Krungsri, has reported a net profit of ... Read more »

Zipmex unveils ZLaunch platform

The ZLaunch platform will be accessible to Zipmex’s users from Oct 26. Zipmex has introduced ZLaunch, a platform that allows users to stake in the platform's original token — Zipmex ... Read more »

Phuket envisages attracting 10,000 tourists per day

Phuket aims to attract 10,000 tourists per day, contributing 35 billion baht to the local economy by December, while the island is listed among the top destinations for local travellers ... Read more »

Ex-monk causes stir on return

Monks pay respect to Winai La-ongsuwan, centre, formerly known as Phra Yantra. The monks have been criticised for inappropriate behaviour as Winai was defrocked for sexual misconduct. Phra Yantra Facebook Fan ... Read more »

Covid patients to get coveted jabs

The Public Health Ministry will provide shots of AstraZeneca or Pfizer to anyone who has contracted Covid-19 but has had at least one month to recover from the disease, according ... Read more »

Park ranger mauled in Asian black bear attack

A park ranger was injured in a bear attack during a routine patrol in Khao Yai National Park yesterday. According to the “Tee Nee Khao Yai” Facebook page, Udomsak Phokrathok, ... Read more »

Boys can get two Pfizer shot doses

The Public Health Ministry has decided that boys aged 12-16 can get two doses of the Pfizer vaccine. Dr Opas Karnkawinpong, director-general of the Department of Communicable Disease, said there ... Read more »

DDC to approve boosters for Sinopharm recipients

The Department of Disease Control (DDC) plans to offer the AstraZeneca or Pfizer vaccine as a booster shot for those who received two inactivated Sinopharm vaccine doses, according to its ... Read more »

Low-risk entry list grows 46 nations' travellers can enter on Nov 1

The government has decided to allow fully vaccinated travellers from 46 low-risk countries to Thailand without quarantine when the country reopens on Nov 1. The “low-risk” country list has grown ... Read more »

Phuket to launch recovery campaign Province looks beyond Covid-19

Representatives of the House committee on foreign affairs inspect a process to screen visitors at Phuket airport late last month. (Photo: Achadthaya Chuenniran) Phuket is preparing to implement the “Together ... Read more »

Many roads 'unsafe' for motorcycles B15bn needed for better infrastructure

Motorcyclists gather at the City Hall last year to inquire about their right to use underpasses and flyovers. (Photo: Varuth Hirunyatheb) Thailand has the highest rate of deaths due to ... Read more »

Qantas ramps up for Christmas rush as Australia borders reopen

SYDNEY (BLOOMBERG) – Qantas Airways is gearing up for a Christmas rush, bringing back all its Australian workers and adding flights as the nation’s borders reopen after more than 18 ... Read more »

China envoy highlights study issue Wait continues to resume China studies

Han: In talks with education officials Thai students will be among the first who are allowed to return to China when the country reopens its borders, according to Chinese ambassador ... Read more »

Hopson says it considers agreement to buy Evergrande unit to be ‘legally binding' despite cancellation

China Evergrande rival Hopson Development Holdings Limited, which had sought to buy half of the embattled developer’s property management unit, still considers the purchase agreement “legally binding” despite Evergrande rescinding ... Read more »

Existing owner-occupied homes in September 18.5 percent more expensive

Photo: ANP Prices of existing owner-occupied homes were 18.5 percent higher in September compared to a year earlier. That is the largest price increase since July 2000. At the same ... Read more »

U.S. government agency in charge of financial stability weighs in on climate change risks

U.S. Treasury Secretary Janet Yellen listens as U.S. President Joe Biden holds a meeting with business leaders and CEOs about the debt limit at the White House in Washington, U.S., ... Read more »

Houses have become more than 80% more expensive in 8 years

The statistical office saw the price increase level off slightly in 2019, but have since picked up again. Statistics Netherlands uses data from the Land Registry about existing private owner-occupied ... Read more »

Shippers are having their own supply chain issues, leading to a battle for packing materials

"Someone like Amazon is obviously going to be at the front of the line to get their share of capacity, whereas these smaller businesses are at the back of the line,” said one e-commerce owner. Read more »

‘With different government policy, the gas price would now have been lower for many people and companies'

Just a few years ago we would have been very happy with today’s high gas prices. As an exporter, the Netherlands earned billions of euros extra for decades if gas ... Read more »

Why work has become an ‘exhausting rat race'

The best career advice for young people? Working on the weekend. Last summer, an American tech investor shared this wisdom on Twitter, adding that in her twenties she worked ninety ... Read more »

Bank of England chief economist warns inflation could top 5%

Huw Pill told the FT that he "would not be shocked" to see the cost of living climb "close to or above 5%" in the months ahead. Read more »

FlixMobility buys Greyhound and has to work hard with the iconic brand

Hollywood’s most famous buses come into German hands. FlixMobility, which runs the long-distance FlixBus in the Netherlands and elsewhere in Europe, and trains in Germany and Sweden, among others, is ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic