The past week had some really good news for Thailand as its think-tank, the National Economic and Social Development Board, announced that the country’s gross domestic product (GDP) for the second quarter of this year had grown by as much as 3.7% year-on-year.
The GDP growth is on the higher end of the projection of 3.3-3.8% that was issued in May this year and topped the 3.3% growth that the country recorded in the first quarter of this year. This is also the highest growth recorded since the first quarter of 2013 when GDP rose by as much as 5.2%.
If this was not good enough, then on Wednesday the Ministry of Commerce released more figures for exports for the month of July 2017. According to the ministry, Thai exports grew for the fifth straight month, increasing as much as 10.5% year on year in the month of July, but slightly below the 11.7% surge recorded in the previous month of June.
For the seven months to the end of July this year, exports have seen an 8.2% year-on-year rise. This stellar performance comes despite the Thai baht being one of the strongest currencies in the region after having risen 7.7% so far this year. The positive data has prompted the authorities to raise the growth target for this year’s exports to 6-6.5% against the 5% target set earlier.
Among other positive news is the fact that exports of vehicle parts have been on the up and are expected to rise by 7.5% to $18.5 billion during this year, according to the Federation of Thai Industries.
With all this good news, one would expect that the performance of the country’s overall economy would be on an uptick, with people from all walks of life enjoying the feel-good factor.
The perceived reality is very different from what is there on the ground. A talk with any major fast-moving consumer goods (FMCG) merchant, be it the likes of Unilever, Proctor & Gamble or Nescafe, would tell a very different story.
FMCG products, such as shampoo, soaps, drinking water, coffee, tea and other daily-use goods, are witnessing the slowest pace of sales in several years, if not decades.
The big question is: If the economic data are so good, then why are the FMCG operators facing this kind of situation?
Is it that the economic growth momentum is not trickling down to the masses and the grassroots level or is it that the bulk of the growth is only a result of the public sector investments that the government is undertaking?
Even urbanites are facing more strains as is evident from the lower spending on credit cards and overall consumption. This slowdown in spending is not only impacting the non-durable goods sector but also durable goods such as TVs, mobile handsets, refrigerators and others.
A consumption spree usually leads to greater private investment and thus greater employment opportunities, increasing public confidence in the future. At the moment most people are living hand to mouth and those who can afford to do so are keen on saving a bit for the dreaded rainy days.
Such data are available to investors who have been sluggish in investing in the Thai equity market. The composite SET Index has only moved up 2.13% so far this year, and this doesn’t compare well with other markets in the region — not even Malaysia’s KLCI, which is up 7.76% so far this year despite that country’s political and economic problems.
Let us not compare it with the Indonesian market, which is up 11.68%, or Singapore’s (up 12.8%) or Hong Kong, which has made even bigger strides by surging 28.4% so far this year.
Although the government seems to be trumpeting its achievements, investors are aware of the underlying problems that the country is facing and are therefore shying away, waiting for a clearer sign of a more sustainable pickup.
It is not that the government is not doing a good job in stimulating the economy but it needs to realise that keeping the momentum of the economic growth going involves many factors and one of the key elements is to have the consumption and private investments pick up.
Measures to stimulate these two aspects of the economy are as important as the government’s spending, which has finally started to arrive, and exports, which are there but could be affected by a stronger Thai currency.
The government therefore needs to make economic growth more inclusive, and measures aimed at stimulating spending and investment would go a long way to complement the good economic data coming out of the industrial and agricultural sectors along with exports and tourism, which have been the key drivers of our economy lately.