January 10, 2014 00:00 By Petchanet Pratruangkrai
Slashes in consumer spending, investments expected, UTCC says
The Bangkok Shutdown is expected to whack Bt40 billion off the economy or 0.2 percentage point off its growth as consumers cut back on daily living and travel expenses, according to the University of the Thai Chamber of Commerce.
“The lower confidence from the political chaos could cause huge losses in the economy from slowdowns in spending, investment and consumption as well as limited travel for both Thais and foreigners,” Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday.
“Because of the weak sentiment, consumers are expected to spend about Bt500 million less a day, while daily tourism income would drop by between Bt200 million and Bt500 million.”
A UTCC poll found that consumer confidence had plummeted to its lowest level in two years, mainly because of the political tensions, while consumer sentiment to purchase a new car or home, to travel or to start a new investment, especially among small and medium-sized enterprises, had dropped to the lowest in seven and a half years.
Spending in Greater Bangkok is expected to fall by 5-10 per cent a day, while spending in other provinces could slip by 1-5 per cent.
Assuming a loss of between Bt700 million and Bt1 billion a day and the metropolis being paralysed for two weeks from next Monday until the election on February 2, the cumulative loss could reach Bt40 billion.
Gross domestic product might grow by only 3-4 per cent this year instead of 4-5 per cent as previously expected.
The political turmoil is the major factor draining confidence. The economy is now quite fragile and sensitive to the political situation, Thanavath said. If the problems have not been solved by this month, first-quarter GDP could contract.
As the situation is expected to normalise, consumer confidence should recover next quarter.
According to the opinion survey of 2,242 respondents from January 2-7, the consumer confidence index slipped for the ninth straight month from 75 points in November to 73.4 in December. That level has not been seen since January 2012. Scores below 100 indicate negative confidence.
Confidence in future employment opportunities dipped from 68.2 points in November to 66.7 points last month, while confidence in future incomes also slid from 91.8 to 90.3.
Confidence in the political situation dived dramatically from 55 to 47.7. The index for politics has declined to the lowest figure in 40 months, since September 2011. Based on the responses of 1,200 consumers and 800 businessmen, about half of the consumers are extremely worried about the “Bangkok shutdown” planned by an anti-government group, while more than half of the businesspeople were highly concerned about the situation.
Wachira Kuntaweethep, assistant director of the centre, pointed out that consumers would likely stock up on goods for fear of the capital’s seizure, while most businesses expect their sales and profits to suffer.
Companies are afraid that their production costs will soar and strain their liquidity.
However, businesses are not yet completely convinced that circumstances will be dire, as they said they would not lay off employees. But investment plans could be delayed.