Brexit, UK voted to leave EU, created great uncertainty to the world economy and financial markets. The post-Brexit economic outlook become more volatile and a rate hike in the US is very uncertain this year.
In May, Thai economy continued to gradually improve from services sector and public investment while exports continued to contraction for two consecutive months.
Durable goods consumption jumped due to temporary factors boosting car sales. However, non-durable consumption and private investment still grew at a marginal level led to low overall private demand. Going forward, an increase in farm income, if proved persist, could help improving private consumption.
Manufacturing production grew up gradually, mainly supported by vehicle & part, electrical home appliances and consumer goods. In addition, industrial sentiment improved as began to abate the drought.
Thai exports in May dropped with lower rate at 4.4% mainly from decreasing volume in electronic parts, auto parts and oil related product. While export to most markets were poor, export to Australia, USA, and CLMV had positive growth, in passenger cars, electronic parts and food.
Inflation rate was 0.4% in June due to higher food price, while steady decline in high base of oil price should result in higher inflation later this year. Though policy rate is expected to be maintained at 1.50%, the Brexit increased the downside risk.
Compare to last year depreciation rage, we expect the baht to appreciate against US dollar with the end-of-year target of 35.00 THB/USD.