Economic activities decelerated across US, EU, and Japan. Notably, lower-than-expected employment data confirms our view that the first rate hike in 2016 might happen in December.
In July, Thai economy continued to expand at a slower pace, driven mainly by public expenditure and tourism while export relapsed into contraction.
Private consumption slowed down, albeit with double-digit rise in farm income, mainly from contraction in durable goods consumption as temporary factors dissipated, while private investment remained tepid.
Manufacturing product fell sharply due to a slowdown in export-oriented products such as vehicle & part, plastics, textile and garment. However, air-conditioner and food (poultry, shrimp) continue to grow.
Foreign tourists still drives economy forward. Number of foreign tourists still increased from all regions (+10.8% yoy) especially, Middle East, Malaysia and Indonesia came back after Ramadan.
•Contracted at 6.4%, July export situation has returned to its sluggish state. This month, besides the slow recovery in world demand, current oil price now affecting Middle East market’s demand for vehicle which decreased 17.4% (Total vehicle export to world -14.7%). For import, which dropped 7.6%, was actually less negative than months earlier, indicating slow improvement as domestic demand remained depressed.
Inflation rate in August increased to 0.29% due to higher food prices. Though we expect 1.5% policy rate throughout 2016, weak private investment and export contraction are still the important downside risks.
We expect the baht to appreciate against US dollar where the end-of-year target is 34.80 THB/USD
(-3.33% from last year end).
-