MTCC News 3/21

| ECONOMIC REVIEW
By RHB Securities (Thailand) PCL
Global Economics & Market Strategy
Thailand: Muted growth in economic activities in September
♦We expect price pressures to remain muted as we head into the 4Q21 following the expected extension of subsidies for
utilities and tuition fees. August CPI inflation printed -0.02% YoY versus the Bloomberg consensus estimate of 0.30% and
July’s reading of 0.45%.
♦We expect the momentum for exports to moderate in September as the impact of the restrictions are expected to last
throughout the month. Exports for August printed 8.93% YoY versus the Bloomberg consensus estimate of 15.10% and
July’s print of 20.27%.
♦Similarly, the momentum for manufacturing production index (MPI) growth is expected to remain soft in September as we
continue to anticipate the lasting impact of the restrictions to seep through factory activities. The MPI for August printed
-4.15% YoY, lower than the Bloomberg consensus estimate of 0% and July’s revised figure of 3.92.
♦ As for the benchmark interest rate, we continue to expect the Bank of Thailand (BoT) to keep the interest rate at 0.50%
for 2021 as the Thai economy slowly moves towards recovery. The BoT had maintained its benchmark interest rate at
0.50% at the monetary policy meeting on 29 September.
Soft momentum will continue from the impact of restrictions
We expect price pressures to remain muted for as we
head into the 4Q21. The Government is expected to
extend the subsidies for utility bills and tuition fees in
efforts to ease the burden due to the ongoing wave of
infections – thus dampening demand-pull price pressures.
Guidance from the Commerce Ministry indicates
that inflation should within the 0.7% to 0.8% range given
that the current measures on utility are extended.
August CPI inflation printed -0.02% YoY versus the
Bloomberg consensus estimate of 0.30% and July’s
reading of 0.45%. This is the first drop in CPI since
March 2021. Price pressures continued to be restrained
by the Government subsidies on utilities and tuition fees –
the housing component registered the sharpest drop in
price among the non-food group of the CPI basket. Lower
prices of certain fresh food such as rice, meat, and vegetables
also contributed to lower CPI. Core inflation also
fell to 0.07% YoY versus July’s print of 0.14%.
We expect the momentum for exports to moderate in
September as the impact of the restrictions are
expected to last throughout the month. Exports of
agricultural products should provide some form of support
for overall growth given its limited impact from the restrictions,
as observed in the August trade data. Moreover, the
Commerce Ministry has suggested that the surge in
imports of raw materials are indicative for stronger
exports growth in the coming months as most of these
goods would be reprocessed and exported out. The
weakness in the local currency should also continue to
support overall export growth for the year.
Exports for August printed 8.93% YoY versus the
Bloomberg consensus estimate of 15.10% and July’s
print of 20.27%. Moderation in exports growth for the
month were attributed to the COVID-19 related restrictions
imposed on some factories which had led to the decline in
production output – the industry component registered the
lowest growth at 3.3% YoY. Meanwhile, exports of agriculture
products continued to remain resilient with strong
growth for rubber, tapioca products as well as rice.
Imports rose to 47.92% YoY, higher than the Bloomberg
consensus estimate of 39.6% and 45.94% in July. The
strong uptick was driven by the rise in orders for raw materials
and capital goods.
The momentum for manufacturing production index
(MPI) growth is expected to remain soft in September
as we continue to anticipate the lasting impact of the
restrictions to seep through factory activities. Supply shortages
in raw materials may also continue to affect MPI
figures in September. Nonetheless, the ease in restrictions
and the increase in vaccination efforts amongst factory
workers are expected to show its affects as we approach
the 4Q21.
The MPI for August printed -4.15% YoY, lower than the
Bloomberg consensus estimate of 0% and July’s
revised figure of 3.92%. This is the first drop in MPI reading
since February 2021, 6 months into the outbreak.
Restrictions and the increase in infections have impeded
factory activities whilst shortages of raw materials such as
semiconductors and automotive parts have also caused
output to decline for the month. Production of electronic
components and boards registered the sharpest decline at
-23.70% YoY followed by automotive production at
-23.34% YoY and rubber and plastic products at -16.45%
YoY. Capacity utilisation also fell to 57.38% from 58.90% in
July.
l 22 MTCC NEWS l December 2021
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