BoT: Low in­come curb­ing re­cov­ery


Soft pur­chas­ing power caused by lower house­hold in­come in both the farm and non-farm sec­tors has hin­dered a broad-based eco­nomic re­cov­ery, says a se­nior of­fi­cial at the Bank of Thai­land.

Pur­chas­ing power, par­tic­u­larly for peo­ple in the low-in­come seg­ment, was still weak in Fe­bru­ary as house­hold in­come fell from a year ear­lier, said Don Nako­rn­thab, se­nior di­rec­tor for macroe­co­nomic and mon­e­tary pol­icy.

Even though the sup­ply of agri­cul­tural prod­ucts in­creased in Fe­bru­ary, crop prices, es­pe­cially oil palm and rub­ber, de­clined by 40-50% on the same pe­riod a year ago, he said.

Farm in­come has con­tracted since the sec­ond half of last year, and non-farm in­come, ex­clud­ing mid-in­come earn­ers and salaried work­force, also plunged.

“The eco­nomic re­bound re­mained un­even and do­mes­tic con­sump­tion was still weak,” Mr Don said. “We need to con­tin­u­ously mon­i­tor the sit­u­a­tion. The Mon­e­tary Pol­icy Com­mit­tee’s re­cent state­ment also said that it is a struc­tural prob­lem. How­ever, pri­vate con­sump­tion is ex­pected to im­prove and is ex­pected to reach 3.3% this year.”

Pri­vate con­sump­tion in Fe­bru­ary rose by 2.5% year-on-year, a slower pace than Jan­uary’s 5.5%.

The rate-set­ting com­mit­tee ear­lier this week raised its eco­nomic growth out­look to 4.1% in 2018 from 3.9% pre­dicted in De­cem­ber, but it left the pol­icy rate un­changed at 1.5% to ac­com­mo­date eco­nomic growth.

Mr Don was quick to calm jit­ters, say­ing farm prices would im­prove in the sec­ond half and help farm in­come move back into pos­i­tive ter­ri­tory this year.

More­over, the gov­ern­ment’s wel­fare and sub­sidy scheme for poverty and mea­sures to aid low-in­come seg­ments will be a boon to pur­chas­ing power and do­mes­tic con­sump­tion in the fu­ture, he said.

The econ­omy con­tin­ued to ex­pand in Fe­bru­ary, pro­pelled largely by strong ex­ports and tourism.

On the do­mes­tic front, ro­bust growth was ob­served in all com­po­nents, namely pri­vate con­sump­tion, pri­vate in­vest­ment and pub­lic spend­ing.

Con­tin­ued ex­pan­sion in both ex­ter­nal and do­mes­tic de­mand con­trib­uted to the growth of man­u­fac­tur­ing out­put.

For the re­main­der of the year, in­ter­nal driv­ers are ex­pected to play a greater role while ex­ter­nal driv­ers will be less im­pact­ful, Mr Don said, adding that state and pri­vate con­sump­tion will im­prove an the kick-start of state in­vest­ment will prompt pri­vate in­vest­ment.

“We’re quite con­fi­dent that the coun­try’s econ­omy will come in at 4.1% growth as fore­cast or 4% on av­er­age each quar­ter, though global trade re­mains un­cer­tain and could take a toll on ex­ports,” he said.

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