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Political situation dents business confidence: BOT

Political uncertainty has had a direct negative effect on consumer spending, investment and tourism business this quarter, according to a survey by the Bank of Thailand.

The BOT survey shows that business confidence, which started to drop in the final quarter of last year, has continued to fall during the current quarter. However, corporate confidence is higher concerning prospects for the second quarter.

"Most firms said consumer purchasing power had decreased because household debt had risen, but people's income was still dropping, especially among those in the agricultural sector," the central bank's report said.

Meanwhile, the prolonged political situation has also impacted on consumer expenditure, with people generally delaying their spending plans.

As a result, new investment in the private sector is being deferred until the next quarter as businesses adopt a wait-and-see approach to the country's economic situation and political uncertainty.

Tourism business has grown only slightly, after being directly hit by the political turbulence - and especially after the caretaker government introduced a state of emergency.

The survey also found that the organisers of some international exhibitions and other events had postponed their Thai plans.

However, the survey found that the export sector was more positive about new orders in the second quarter than in the first three months of the year, thanks to a recovery in the global economy.

This includes businesses exporting electronics and machinery for the auto industry, and those selling rubber, for which orders from China are expected to rise.

Meanwhile, the property sector has slowed in the current quarter due to the domestic economic slowdown and political uncertainty, plus the fact that commercial banks are restricting the provision of mortgages out of concern about loan quality at a time when purchasing power has dropped.

BOT Governor Prasarn Trairatvorakul said after opening the "Money Expo" event in Pattaya yesterday that he was concerned about people's savings being lower than what the central bank had previously estimated.

BOT and National Statistical Office data for last year showed that 22.6 per cent of the population did not have savings, and that only 23.3 per cent had saved enough for their retirement.

"We want to promote Thai people to save rather than create debt, as household debt is now more than 80.1 per cent of gross domestic product," he said.


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