Thai economy:Repeat the hymn again

Event

    We believe one of the easiest jobs in Thailand at the moment is that of monthlyscript writer for the BOT’s economic statistics release. We find few changes inthe commentary for data to March, released today, vs the previous month.Tourism and public spending remained key areas of support, while domesticand export demand remained weak. The MOF became the latest agency todowngrade 2016 GDP growth forecasts earlier this week, to 3.3% from 3.7%,still slightly above our forecast (and private sector consensus) at 3.0% and theBOT’s forecast at 3.1%. Recent cuts in benchmark lending rates by commercialbanks raise the probability that the BOT will lower its policy rate at the next MPCmeeting (11 May). However, at this point we maintain our forecasts for GDPgrowth and an unchanged policy rate of 1.50% through 2016.

    Impact

    Domestic demand indicators were broadly stable in March vs February. TheBOT’s private consumption index increased 0.4% MoM (up 2.1% YoY), andthe private investment index was down 0.3% MoM (up 1.6% YoY). FebruaryYoY growth rates for both indices appear to have been revised down.

    Consumption saw an improvement MoM in the durables component of theBOT’s PCI index due to higher sales of pick-up passenger vehicles (PPVs),but overall spending remained at a low level, and households became morecautious, according to the BOT (especially farm households due to thedrought). Tourist spending was again the strongest element of overallconsumption, with 15.4% growth in arrivals YoY, led by Chinese tourists.

    Private investment indicators were described as stable MoM but continuedto show a decline in new construction permits. Private sector credit growthhas also slowed through 1Q16 (see chart on the left).

    External accounts continued to show underlying declines in merchandiseexports & imports, with exports down 3.4% (excluding exports of gold) andimports down 9.1% YoY in March. There was another large trade ($4.7bn)and current account surplus ($5.0bn) in February. The capital accountshowed a deficit of $2.3bn, attributed to the sale of BIGC by Casino,increased trade credits extended by Thai exporters and an acceleration ofThai direct investment abroad. We think the latter is an ongoing trend, givensoft domestic growth in contrast to neighbouring ‘CLMV’ economies.

    Monetary policy has remained essentially unchanged for the past 12months, with the BOT’s policy rate at 1.50%. While we maintain our forecastfor no further easing from the BOT, the next MPC meeting on 11 May will beof particular interest given recent loan rate cuts from the banks and continuingsoftness in domestic demand.

    Fiscal policy saw no major change in March but remains supportive with anincreasing trend of government spending relative to revenues vs recent years.

    Outlook

    We make no changes to our forecasts following this data release.