August 2023 brought stability to the Thai economic and household index (KR-ECI) as it held steady at 36.2, with the three-month index maintaining its position at 38.9, similar to July’s figures. This resilience comes amidst an economic landscape in Thailand characterized by lingering uncertainty. Looking ahead, the index appears poised for a gradual recovery, aligning with the trajectory of the broader Thai economic revival, buoyed by the clarity provided by a newly established government. However, challenges loom in the form of drought and a global economic slowdown, potentially casting a shadow over the index’s delicate recovery.
A closer examination of the index composition reveals a decline in household concerns regarding income and employment, mirroring Thailand’s economic activities, particularly the burgeoning service sector, with a notable focus on the tourism industry. The labor market has also seen improvements due to expansions beyond the service sector and agriculture, evidenced by data on employment in the wholesale and retail sectors, production, and construction for July, which showed an uptick compared to June.
While gains are apparent in some areas, Thai households seem to be increasingly perturbed by rising product prices and the persistent high cost of living. This unease is exacerbated by potential risk factors on the horizon, such as the possible price hikes of agricultural products, resulting from drought-induced production declines, as well as the continued volatility of global crude oil prices.
Furthermore, concerns about debt repayment obligations are on the rise, as indicated by the proportion of bad debt or loans overdue by more than three months (NPLs), which now stands at 2.68%, marking a slight increase from the previous quarter. The auto loan segment, in particular, is expected to witness a continued rise in bad debt.
In a supplementary survey conducted by the Kasikorn Research Center on household debt plans for the next three months, a significant majority (78.8%) expressed no intentions to acquire additional debt. Among those contemplating additional borrowing (21.2%), 33.0% seek to enhance liquidity, while 27.8% plan to invest in businesses, 21.7% aim to purchase durable goods like automobiles, and 12.7% consider buying a house or residence.
Households also contemplate deploying loans for purposes like education and medical expenses, but the decision to incur additional debt may hinge on the prevailing high-interest rates. This factor could significantly influence households’ future borrowing decisions.
The Kasikorn Research Center remains optimistic about the KR-ECI index, expecting a sustained improvement in the second quarter of 2023, driven by the ongoing recovery of the Thai economy and the resurgent tourism sector, which will positively impact the income and employment outlook for Thai households.
Moreover, the recent formation of a new government following the election of Thailand’s 30th Prime Minister in August 2023 is expected to bring about a policy statement to Parliament in early September 2023. Anticipated policies are likely to focus on mitigating the cost-of-living impact and supporting the tourism sector’s resurgence, aligning with this year’s priorities. These measures hold the potential to allay concerns among households about their economic well-being and future livelihoods.
Nevertheless, the path to index recovery remains fraught with challenges, including the looming threat of drought due to the El Niño phenomenon and the uncertainty surrounding the global economic slowdown, particularly the underwhelming performance of the Chinese economy. These factors may exert pressure on Thailand’s economy through its tourism sector and exports. As a result, the KR-ECI Index may continue its precarious recovery through the remainder of 2023.