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Foreign purchase orders to rise, investment still slow: BOT

Foreign purchase orders are expected to start recovering this quarter, while investment will continue to see only slight recovery while the private sector waits for more clarity on the direction of the new government, according to the Bank of Thailand's second-quarter business survey.

Most business operators expect exports to improve in the current third quarter, as reflected by an estimated recovery of purchase orders from other countries following the global economic recovery, the survey found. In particular, purchase orders from Europe are expected to recover with the acceleration of imports before Thai products lose their tariff privileges under the Generalised System of Preferences in November.

Based on the survey, manufacturers of rubber goods expect improved exports as China's inventory gets low. Export of automobiles and parts is also expected to expand, given consistent demand and expansion of new markets. However, garment exports could slow after the end of the Fifa World Cup.

Private consumption is likely to expand only gradually this quarter, the survey suggested. Improved consumer confidence and more promotional activities by retailers and car companies could slowly raise sales. This forecast is in line with a slight rise in three-month local purchase orders and estimates by most financial institutions of more consumer loan demand in the next three months.

However, private consumption, particularly among low-income earners, may not fully recover because of the rainy or off-harvest season, the survey found. Low crop prices and high debt burdens continue to hold down purchasing power.

Private investment is expected to see a slight improvement, reflected by a slight rise in demand for fixed-asset investment. Higher demand for business loans focused particularly on short-term working capital in the second quarter.

"Based on interviews with business operators, most of them have slowed down investment, particularly for expansion of production, so as to assess the economic situation and the economic policy after a new government is formed," the survey report said.

Foreign investment

Some operators, such as those in the garment and food and beverage businesses, will start investing in Cambodia, Laos and Vietnam to expand markets and lower labour costs.

Tourism is expected to continue its contraction. However, there are some signs of improvement, the survey found, as bookings were shrinking more slowly. Business operators forecast that tourism would resume its normal level in the final quarter of the year.

Property business is tending to improve thanks to a clearer political situation, clearer infrastructure investment policy and continued state spending. Demand for residential units could rise on a gradual recovery of consumer confidence, reflected by a higher number of visitors to housing projects and more purchase decision-making from late in the second quarter.

However, high household debts and unclear signs of economic recovery have resulted in continued caution among consumers.

Respondents to the survey said employment could rise slightly on improved business confidence.

Costs may surge for some businesses, with the property business expected to see sharp increases in the cost of construction materials and wages after developers start launching new residential projects. Auto-parts makers expect steel prices to continue rising.


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