Economic Weakness Continues, Political Pressure On BoT Unlikely To Wane

Thailand’s economy continues to underperform the region and the February S&P Global manufacturing PMI and business sentiment signal that the undesired situation continued into Q1. The government has been putting pressure on the Bank of Thailand (BoT) to cut rates to stimulate the lacklustre economy but the central bank has responded that structural problems are the cause, which monetary policy cannot impact. But while data continue to disappoint, political pressure on the BoT is likely to continue. The next meeting is on April 10.

• Thailand’s Q4 GDP rose 1.7% y/y compared to Indonesia’s 5.0%, a situation that has been the case for some time and early 2024 data are suggesting that it will continue for now.
• The manufacturing PMI in February fell 1.6points to 45.3, signalling that activity in the sector is falling at its fastest pace since the Covid-impacted June 2020. Indonesia’s was relatively steady at 52.7. The decline was driven by new orders falling at their third fastest pace and the decline in export orders also increased, which has now resulted in job losses.

Source: MNI - Market News/Bloomberg

• February BoT business sentiment rose moderately to 48.8 from 48 and remains below 50, but is more optimistic as it is supported by services in line with more positive consumer confidence due to the recovery in tourism. Orders fell to 47.1 from 47.9 though, which is negative for Thailand’s industrial outlook. The PMI’s business confidence component also deteriorated due to the lacklustre economic and sales outlooks.
• Since, the PMI has been below the breakeven-50 level since August last year, it is unsurprising that manufacturing production remained weak in January declining for the fourth straight month and 3-month momentum is significantly negative at -10.1%.

Source: MNI - Market News/Refinitiv