Gifts that keep on giving
Improved consumer sentiment and stimulus measures have businesses upbeat about early 2023, write Phusadee Arunmas, Suchit Leesa-nguansuk and Molpasorn Shoowong
Festive sentiment during the last week before New Year celebrations is considered the best opportunity for the business sector to increase sales as economic uncertainties may cast a shadow on consumer confidence in 2023.
With normal shopping sentiment returning as pandemic curbs were eliminated, plus a string of stimulus measures announced last week, business operators anticipate brighter prospects to continue until early 2023.
However, some operators believe the government should put more effort into promoting key sectors like tourism amid the recovery.
Kasikorn Research Center estimates domestic travel from Dec 30 to Jan 2 will generate revenue for tourism and related sectors of 14.5 billion baht, while spending by foreign tourists during the period is expected to reach 15.5 billion baht.
The combined spending of 30 billion baht represents 50% of the level for the same period in 2019 before the Covid19 crisis.
The research house said although the number of overall tourists improved from last year, the tourism industry still has to monitor several factors, including the recovery of the Thai and global economies, which could affect tourists’ purchasing power, and intensifying competition from existing and new operators.
ACTIVE SPENDING
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said consumer spending during the upcoming New Year festive season is expected to be the most active in three years, bolstered by the country’s economic recovery and reviving tourism after the easing of the pandemic.
“Prior to the viral outbreaks, Thais spent around 100 billion baht during New Year celebrations, but in the past two years Covid-19 whittled down spending to less than 100 billion a year,” said Mr Sanan.
“With the gradual economic recovery and projection of 10-11.5 million foreign arrivals this year, the celebration mood is likely to resume to normal.”
He said people are ready to spend more durable goods, citing bookings of more than 42,000 cars at the Thailand International Motor Expo, which ended on Dec 12.
“We believe spending during the New Year festival will exceed 100 billion baht, with or without the government’s stimulus measures,” said Mr Sanan.
“Spending during the New Year season will generate more activity in the economy.”
However, he warned all parties to watch economic conditions in the first quarter of next year as a global slowdown is likely to impact the Thai economy and exports.
GIFTS NOT ENOUGH
The government should implement additional measures other than the “New Year gift package” to strengthen the economy, especially via a tourism booster, to help the country endure a looming global recession next year, said the Federation of Thai Industries (FTI).
“It is good the government approved spending stimulus programmes during the festive season, but the authorities need to think more about how to grow the tourism industry as more foreigners continue to visit Thailand,” said Kriengkrai Thiennukul, chairman of the FTI.
Tourism will become the key economic driver as exports are expected to slow next year over worries over a sluggish economy in Europe and the US, he said.
The World Bank warned earlier of a global recession in 2023 after central banks raised interest rates in response to high inflation.
“Thai manufacturing will expand in the same direction as the increase of tourist arrivals,” said Mr Kriengkrai.
He believes the number of foreign visitors will spike to 21 million next year.
Malaysians and Indians are among the main source markets for tourism following the reopening of the country and the easing of travel restrictions.
“Chinese tourists will follow in the third quarter of next year if Beijing continues to relax its zero-Covid policy,” said Mr Kriengkrai.
He wants the government to support and advise hotel operators to adapt their services to match tourists from countries such as India. Indian tourists have high spending during their stays here, said Mr Kriengkrai.
Hotels can focus on serving Indian food, especially vegetarian cuisine, because many Indian tourists do not eat meat, he said.
Hotels may want to add some Indian culture to their services in order to create a stronger impression on Indian guests, said Mr Kriengkrai.
With the tourism recovery expected to gain momentum, the government should take this opportunity to use soft power to promote Thai art and culture, which will eventually benefit the economy, he said.
Soft power and tourism should be melded to encourage foreign tourists to buy unique products and services during their travel in Thailand, said Mr Kriengkrai.
‘‘ The stimulus schemes are a good start, but the authorities need to think more about how to grow the tourism industry as more foreigners continue to visit Thailand. KRIENGKRAI THIENNUKUL Chairman, Federation of Thai Industries
IT product distributors agree the “Shop Dee Mee Khuen” tax rebate scheme could be a key driver of sales early next year.
Somchai Sittichaisrichart, managing director of SET-listed SiS Distribution Thailand, a tech product distributor, said the scheme can stimulate the purchase of IT products, particularly gadgets, smartphones and other electronic items.
Last year’s scheme saw sales surge 30-40% from the normal level, he said.
Shoppers expected to claim a maximum 40,000-baht tax deduction are believed to have high income and are unlikely to be affected by economic turbulence, inflation or a weaker baht, said Mr Somchai.
However, the stimulus is unlikely to prompt people with lower income to maker purchases as a large number of IT items were bought during the pandemic when remote work and online study gathered pace, he said.
Pravit Chinprasert, managing director of IT gadget distributor Banleong Chin Inter, concurred that the tax rebate scheme would be a boon for spending on IT gadgets and accessories, especially items for children such as smart watches designed for the young.
Tech products for children have the potential to grow by 200-300% a year, compared with IT items for adults, as this market is approaching maturity, with annual growth of 10%, he said.
Mr Pravit believes the mass market may focus on using the tax rebate scheme for consumer products.
“Thailand’s economy is expected to slow over the next two years, weighed down by the sluggish return of Chinese tourists and the Russia-Ukraine war that hinders the macroeconomy,” he said.
Mr Pravit predicted the IT market to remain flat next year.
Tech market analysis firm Counterpoint said high inflation and the RussiaUkraine war took a toll on smartphone purchases in the third quarter, as handset shipments fell 12% year-on-year during the period.
The country’s tech sector is also recording weak investment, Counterpoint said in its report.
“Thailand’s smartphone market might take longer than expected to bounce back. For now, the affluent class is helping balance and sustain the smartphone market,” said the report.
BUSINESS AS USUAL
Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association (THA), said hotels continue working on New Year events to accommodate their guests as usual because the government hasn’t announced any cancellation or prohibition of such events.
She said bustling celebrations are expected, though the private sector is committed to complying with safety rules mandated by the authorities.
With the cabinet just announcing stimulus packages as New Year gifts, including a reduction on the land and building tax by 15%, Mrs Marisa said it would be better if the hotel sector could gain more discounts because it carried a heavy cost burden from Covid-19 for two years.
“Even though many hotels have good occupancy rates, the recovery pace is different for hotels in each segment,” she said.
Previously, THA proposed a tax cut of 75% and 50% in 2023 and 2024, respectively.
Mrs Marisa said THA is calling for more than three loan instalment payments without interest, given that many hotels still struggle with soaring operating costs.
With the new land appraisal prices set to increase by 8.9% next year, according to the Treasury Department, she said the tax reduction of 15% might be too paltry because hotels’ tax rates are calculated based on land and building prices.
Mrs Marisa said with the “We Travel Together” hotel room subsidy scheme possibly reduced to 500,000 rooms, this quota could run out before the Songkran holidays, which is the busiest travel period for Thais.
She said it would be preferred if the Shop Dee Mee Khuen scheme included hotel services to provide extra benefits to taxpayers.
At present, the scheme allows rebates of up to 40,000 baht for retail products and services, excluding some goods and services such as travel tours, alcoholic drinks and hotels.
Mrs Marisa said the tourism sector is the main driver of Thailand’s economy. The budget for tourism stimulus packages the cabinet is slated to reconsider next week should be spread among all players across the supply chain, such as upskilling and reskilling programmes for tourism workers, creating a data bank or developing sustainable tourism products, she said.
Though the plan to extend closing time to 4am for night-time entertainment venues was shelved indefinitely, Mrs Marisa said this idea was created as a convenience for foreign tourists as some of them prefer to have late meals. She said if this policy is reconsidered, it should be restricted to certain areas.
TAX CUT FOR CAPITAL MARKET
In addition to the government’s conventional stimulus measures to boost consumer spending, Chaiyaporn Nompitakcharoen, deputy managing director of Bualuang Securities, said tax cuts should be considered that encourage middle- and upper-class consumers to invest, boosting money circulation in the economy.
“We would like to see tax cuts for long-term savings,” he said.
“After the tax deduction for longterm equity funds expired, incentives for long-term investment no longer exist. The measure by the Finance Ministry to grant tax deductions under the ‘super savings funds’ and retirement mutual funds for a combined amount of 500,000 baht per person is not enough to encourage more spending.”
Mr Chaiyaporn said the asset management sector has been waiting for additional government policies to encourage more long-term investment.
“A major concern now is high household debt. The next government must tackle this as a national policy agenda because if people do not have enough purchasing power, the economy will certainly plunge further. We cannot rely exclusively on domestic consumption to boost the economy because purchasing power is weak,” he said.
In some countries, the government helps arrange soft loans to help businesses survive the current high interest rates. For certain parts of the economy, lenders charge interest of up to 12%, so if the government can provide a soft loan package, it will boost confidence and stimulate spending, said Mr Chaiyaporn.
Household debt is high at 80-90% of GDP. If this problem cannot be solved effectively, the country faces an economic time bomb, he said.
Thailand has adopted a conservative monetary policy when household debt is high. The Bank of Thailand has told financial institutions to be cautious in lending to prevent bad debt.
“We hope the next government will join hands with the central bank to find a solution to this problem,” said Mr Chaiyaporn.