Thailand Microeconomic Weekly Update #52

THAILAND MACROECONOMICS WEEKLY UPDATE

In Thailand, economic indicators paint a mixed picture. The core CPI fell short of expectations at 0.58%, while the headline CPI came in at -0.83%, largely due to declining energy and fuel prices attributed to government subsidies. On another front, the initial month of government aid registration for non-financial institution-related debt relief saw significant participation, with 114,307 individuals signing up.

The government’s ambitious plans for the Eastern Economic Corridor (EEC) suggest a promising job creation potential of 200,000 positions, aiming for a total value of 1.2 trillion baht. However, the University of the Thai Chamber of Commerce has revised its 2023 growth estimate downward to 2.5%, down from the earlier prediction of 3%, although it foresees a slight uptick to 3.2% in the current year. Meanwhile, Mr. Ronarong Poolpipat, Director-General of the Department of Foreign Trade, disclosed November 2023 border and transit trade figures amounting to 148,566 million baht ($US 4,277.74 million).

INDUSTRY 

Next week consumer confidence data will come out as the market digest the budget debate and also E-Receipt stimulus.

TOURISIM

Tourism Authority of Thailand

The Tourism Authority of Thailand (TAT) is facing a challenging situation as the fiscal budget for tourism marketing in 2024 has been significantly reduced compared to the benchmark year of 2019. Despite achieving a record high of nearly 39.8 million foreign visitors in 2019, which generated around 2 trillion baht (USD 58 billion) in revenue, the budget for 2024 has been set to 5.2 billion baht (USD 150 million), approximately 20% lower than the amount allocated in 2019. The TAT has an ambitious target to boost foreign arrivals from 28 million in 2023 to 40 million in 2024, but the reduction in marketing budget is a significant obstacle. The government has considered increasing tourist numbers to 40 million, supported by new measures such as a reciprocal visa-free scheme between Thailand and China. However, the official target remains at 35 million foreign arrivals. The TAT, despite having a slightly higher budget than the previous year, faces the possibility of further cuts due to ongoing debates on the 2024 Budget Bill. As part of their strategies to maintain economic growth amid softer revenues from other sectors, TAT and government officials are yet to provide robust mechanisms to boost domestic tourism, which previously benefited from subsidy programs during the pandemic. This entire scenario poses a considerable challenge to achieving the increased revenue target of 2.5 trillion baht (USD 72 billion), especially in attracting sufficient tourist numbers to reach the ambitious goals.

Tax Cut Approval

The Thai cabinet has enacted tax cuts on alcoholic beverages to refresh tourism. Import tariffs on wines, as high as 60% of declared value, will be waived for a year. Excise tax on wine and local liquor is also reduced to boost small-scale producers. Additionally, entertainment venues will see their excise tax halved to help businesses recover post-pandemic. These measures are temporary, expected to increase tourist spending and offset tax revenue losses. Last year’s tourist influx significantly contributed to the economy, and with these changes, the country targets even higher foreign arrivals in 2024

REAL ESTATE 

The current situation in the luxury home segment in Bangkok, suggesting a supply excess while anticipating higher demand for middle to upper-end low-rise houses due to expanding mass transit lines. The managing director of Terra Media and Consulting, Sumitra Wongpakdee, reports a 53% growth in low-rise houses priced over 25 million baht (USD 722K) launched in Greater Bangkok compared to 2022, despite the luxury segment facing limited demand and the lowest absorption rate.

Developers are advised to be cautious in launching new supplies in this segment. A total of 2,300 units were launched in 2023, a significant increase from 1,500 units in 2022, marking the highest annual amount since 2015. Despite the growth, the luxury segment recorded the lowest monthly average absorption rate compared to other price segments. Notably, the location with the highest monthly absorption rate was Lat Phrao-Ramkhamhaeng-Bang Kapi, driven by the new Yellow Line mass transit.

ENERGY

Gunkul Engineering Public Company Limited (GUNKUL)

Gunkul Engineering Plc, a construction and renewable energy firm, is set to fundraise between 20.8-25 billion baht (USD 606-729 million) for 17 renewable energy projects as part of a 5.2-gigawatt state renewable scheme. Winning bids for 17 of 27 proposed projects, the company has signed 25-year power purchase agreements with the Electricity Generating Authority of Thailand for eight projects and plans for the remaining nine within the year. Each project costs 25-30 million baht (USD 729K-875K) per megawatt, financed up to 70% through fundraising, including bank loans. The projects, a mix of solar and wind farms, are part of Gunkul’s 2022-25 investment plan, aiming to expand its capacity from 615.55MW to 1,045.15MW with operations commencing between 2026 and 2030.

SECTORAL UPDATE 

 SET closed the week at 1,427.96 points, a down of  6.63 points ( -0.46%), trading value last day of the week 51,141.32 million baht ($US 1472.12 million.

The SET Index is currently fluctuating within a support range of 1,370-1,380 points, while also testing resistance levels between 1,426-1,430 points, awaiting clearer government policy. Additionally, the Relative Strength Index (RSI) stands at 61.05.

 

With the RSI at 58, signifying strength, the USD/THB faces support at 34.00 and resistance at 34.80 amid the dollar’s weakening trend.

The past  week foreign investors have been heavy buyers starting of the month of  buying of January on expectations of the government.

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