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Thai Household Index in February Recovers Alleviating Inflation Concerns – Tourism Boosts Income

The Kasikorn Research Center has reported an improvement in the KR-ECI household economic conditions index (KR-ECI) for February, which came in at 36.6, up from 35.1 in January. The three-month index also improved, from 37.8 in January to 38.6 in February. Although households remain concerned, the level of concern has decreased, as they have gained a better perspective on slowing costs and prices. This is in line with the Thai inflation rate in February, which slowed down to 3.79% due to a decrease in fresh food prices.

The government’s efforts to alleviate inflation concerns include a reduction in the retail price of diesel to 34 baht per liter, after being held at 35 baht per liter for seven months. The government has also extended the tax reduction on diesel fuel by 5 baht per liter until May 2023.

The recovery of the tourism industry has also boosted household income, providing some relief from inflation concerns. However, households remain increasingly concerned about the burden of debt going forward. This is due to rising domestic interest rates resulting from the policy rate hike by the Bank of Thailand, which currently stands at 1.50% per year. Rising loan interest rates may increase the cost of household finance, putting pressure on household budgets.

The Kasikorn Research Center predicts that household debt to GDP may slow down to a range of 84.0-86.5% in 2023, but the debt burden remains relatively high. This may limit the growth of household consumption in the future.

Overall, the recovery of the household index in February is a positive sign for the Thai economy. However, continued efforts are needed to keep inflation concerns in check and to address rising household debt, which could impact household consumption and economic growth.

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