September 12, 2008
Thai consumer confidence at year’s low
Thailand’s consumer confidence fell in August to its lowest level this year, hurt by political unrest and the high cost of living, reported Reuters.
The agency quoted analysts as saying that consumption would do little to support economic growth unless the crisis ended. The confidence index dropped to 70.5 in August from 71.8 in July and was at its lowest since last December.
"The main reason is politics. Falling oil prices and government measures did not help lift consumer confidence and there is no sign of recovery," Thanavath Phonvichai, poll director of the University of the Thai Chamber of Commerce, told a news conference on Thursday.
"If the situation is prolonged, it will affect consumption towards the end of the year or probably early next year" he said.
Samak Sundaravej was forced to step down as prime minister on Tuesday after just seven months after a court ruled there was a conflict of interest when he was paid to host a cooking programme on TV while in office.
He has faced a street campaign to topple him since May 25 and imposed a state of emergency in Bangkok last week after one man was killed in clashes between pro- and anti-government groups.
Ordinary people are finding it hard to make ends meet.
"It's really tough. The economy is very bad and everything is very expensive. We have no future now," said Aree Juansuk, a 33-year-old maid who earns $6 a day.
"I was hoping the new government would make things better, but they are just fighting for power while we are struggling for survival," the mother of three said.
Capital Nomura Securities economist Nuchjarin Panarode said everything hinged on politics.
"If the tensions unwind, consumer confidence should improve because the two other main factors have already eased, with oil prices falling and interest rates having peaked," she said.
The Bank of Thailand raised interest rates by a combined 50 basis points to 3.75 percent in August and July to fight inflation, but analysts expect no further increase this year as the economy has slowed and inflation eased from a decade high.
The crisis has hit the tourist industry, which brings in the equivalent of 6 percent of gross domestic product and directly employs 1.8 million people in a country of 65 million. Thai
Airways THAI.BK warned that its revenue would fall this year.
The damage has spread beyond the tourist sector.
Top credit card issuer Krungthai Card has said 2008 earnings would at best be similar to last year, blaming the unrest in part, and home builder Land & Houses said Thais were deferring home
purchases because of the uncertainty.
Broker Seamico Securities said on Thursday it would look for overseas investments to offset risk at home, where the main stock index has lost 24 percent so far this year and foreign investors
have sold $3.3 billion net of shares.
The turbulence had added to concern about the export-led economy at a time of weak global demand and investment, prompting analysts to cut their growth projections for Thailand.
The Chamber of Commerce said that if the turmoil went on for another month, it would cost the economy as much as $1.8 billion and pull annual growth down to 4.9-5.1 percent rather than the 5.6 percent it had forecast previously.
Rating agency Fitch said on Wednesday it had lowered its 2008 growth forecast for Thailand to 4.6 percent from 4.8 percent and it warned the turmoil might threaten the country's ratings.
"The longer it lasts, the more likely it would start to affect economic performance more seriously," James McCormack, head of Asia Sovereigns at Fitch, told Reuters.
Finance Minister Surapong Suebwonglee admitted on Wednesday the government might miss its 5 to 6 percent growth target because of the unrest.
The economy grew just 4.8 percent in 2007, with low confidence a factor after a military coup in 2006.