MTCC News 3/21

By RHB Securities (Thailand) PCL
| ECONOMIC REVIEW
Global Economics & Market Strategy
Thailand: Moderate growth in 3Q21
♦ We expect monthly momentum for inflation to ease further in August before improving in the consequent
months. July CPI inflation printed 0.45% YoY, lower than the Bloomberg consensus estimate of 0.88% and June’s
reading of 1.25%.
♦Meanwhile, we anticipate exports to moderate in August, reflecting the surge in infections and the impact of the
restrictions for the month. Resilient external demand and weak Baht should still provide support for exports. Exports
for July printed 20.3% YoY versus the Bloomberg consensus estimate of 19.7% and June’s reading of 43.8%.
♦Similarly, we expect the manufacturing production index (MPI) to ease in August following the imposition of strict
lockdown measures across the region. However, the slight easing of restrictions and the increase in vaccination
rate should improve MPI performance from September onwards. The MPI printed 5.1% YoY for July versus the
Bloomberg consensus estimate of 12.3% and June’s reading of 18.3%.
Muted performance in August given strict lockdown measures
We expect monthly momentum for inflation to ease further in August before improving in the consequent
months. This is as government subsidies for electricity and water bills will partially cap the rise in prices for the month
while dampening purchasing sentiments, given that strict restrictions remained in place for August, is expected to limit
demand-pull inflationary pressures. Of note, consumer confidence fell further to 40.9 from 43.1, claiming the lowest level
recorded, following the spread of the third wave of infection in the country.
July CPI inflation printed 0.45% YoY, lower than the Bloomberg consensus estimate of 0.88% and June’s reading
of 1.25%. Price pressures for the month were weighed down by the Government subsidies on utility bills, tuition,
and education. Declining prices for some fresh food such as rice and vegetables also contributed to the slowdown in
headline inflation. Meanwhile, core inflation, which excludes raw food and energy prices, moderated to 0.14% YoY from
0.52% YoY the month prior.
Meanwhile, we expect exports to moderate in August, reflecting the surge in infections and the impact of the
restrictions for the month. Agriculture exports may be affected by the closures of some fruit factories and supply chain
disruptions due to virus outbreaks in the region. Containment of the virus in major sectors, as vaccination rate increases
from September onwards, should buttress exports performance. However, the weak Baht and recovering global
demand should support overall performance, particularly for the manufacturing exports.
Exports for July printed 20.3% YoY versus the Bloomberg consensus estimate of 19.7% and June’s reading of
43.8%. Manufacturing exports, accounting for around 80% of exports, moderated slightly to 18% YoY from 44.7% YoY
in June. Shipments of electronics, electrical equipment as well as vehicle and parts remained resilient for the month.
Exports of agriculture products rose at a slower pace for the month, printing at 24.3% YoY versus 36.0% the month prior.
Meanwhile, imports printed 45.9% YoY, lower than June’s print of 53.8% YoY.
Similarly, we expect the manufacturing production index (MPI) to ease in August following the imposition of strict
lockdown measures across the region. The closure of factories will also dampen manufacturing activities for the month.
Nonetheless, the slight easing of restrictions beginning on 1 September and the increase in vaccination rate, as supply
increases, should improve MPI performance from September onwards. Moreover, the newly launched Factory Sandbox
pilot programme should instil greater confidence in the recovery of manufacturing activities. The scheme will increase
the vaccination rate and ensure stricter containment of COVID-19 infections of factory workers, with priority for factories
under the automotive, electronics, food and beverages, as well as the medical equipment sectors.
The MPI printed 5.1% YoY for July versus the Bloomberg consensus estimate of 12.3% and June’s reading of
18.3%. The low base helped to partially support growth momentum for the month as the manufacturing sector was
impacted by the spread of infections in factories. In terms of its components, production of petroleum refining products,
apparel as well as computers and peripherals remained resilient for the month, printing at 23.2% YoY, 16.5% YoY and
32.6% YoY respectively. Production of other components declined for the month with sharpest stemming from the
production of rubber and plastic products (-20.6% YoY). Capacity utilisation also dropped to 58.1% from 62.5% in June.
l 20 MTCC NEWS l December 2021
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