Manufacturers see bright 2H amid junta-imposed political calm
June 25, 2014 00:00 By Petchanet Pratruangkrai
After a month of the junta's stern stewardship, manufacturing and trading are not only recovering but also picking up steam towards a bright second half of the year.
However, manufacturing and trading are still waiting for clearer evidence of rising domestic consumption as well as for more macroeconomic stimulation packages from the military’s ruling National Council for Peace and Order (NCPO).
The recent revival in consumer demand can be attributed to two fleeting factors – the World Cup and the payment of overdue government debt to farmers under the rice-pledging scheme, which has just been completed.
Thanavath Phonvichai, director of the Economic and Business Forecasting Centre, has said the economy is expected to expand 2-3 per cent this year, driven mainly by domestic consumption.
"A recovery in consumer confidence a month after the coup has helped fuel demand in many industries. Consumers have more confidence to spend their money to buy things and invest, helping industry and trading to grow," he said.
According to a survey by the University of the Thai Chamber of Commerce, consumer confidence last month swung up for the first time in 14 months to 70.7 points out of 100, also the highest score in four months.
Rising confidence has led to firming demand for new cars, houses and travel. Companies, especially small and medium-sized enterprises, are starting to invest in their business again.
Demand for new cars also increased for the first time in 14 months.
The Thai Industries Sentiment Index in May rose to 85.1 from 84.0 in April, the first increase in seven months, according to a survey by the Federation of Thai Industries (FTI) of 42 industries.
Manufacturers saw positive signs for the economy after abating political tension and the payment to rice-pledging farmers, which injected cash into the system.
FTI chairman Supan Mongkolsuthee said a positive sign for manufacturing from the new military government was that there is more confidence in the private sector, with political stability ensuring a smooth path for doing business and planning for future investment.
Industries that are showing clear signs of recovery are electronics and electrical appliances, food, and automobiles.
The economy should bulk up by 2-2.5 per cent this year, with clearer indications of economic good times emerging in the third and fourth quarters, Supan said.
To boost manufacturing and trading, the NCPO should continue launching measures to facilitate more trade and investment, such as lowering logistics costs, reducing customs and government red tape, and drafting and amending rules and laws, he said.
Some sectors growing
Surapong Paisitpattanapong, vice chairman and spokesman for the FTI’s Automotive Industry Club, said that since the military seized power from the elected government about a month ago, political unrest had settled down, and that had given a lift to sales of automobiles.
The NCPO had also implemented many pressing measures, including the return of money to the farmers participating in the rice-pledging scheme and the acceleration of disbursements of the state budget.
They had also passed a draft act for next year’s fiscal budget. Many projects set to develop the country’s infrastructure and mass-transport systems would be urgently conducted and stimulate employment and the overall economy.
"Domestic sales for vehicles will show clear evidence of rebound in the second half of this year, starting from pickup trucks, small passenger cars and motorcycles," he said.
The country produced 148,201 vehicles last month, down 36.1 per cent year on year, after the end of the elected government’s first-car tax-break scheme. Of total output in May, 62.2 per cent was exported, up 2.4 percentage points year on year.
Arnut Changtrakul, corporate vice president for sales and marketing at Thai Samsung Electronics, said that after the political situation started to become much more stable over the past several weeks, customers in Bangkok and major cities had increased by 20 per cent.
The home-appliance market dropped 10-20 per cent at the beginning of this year, but started to pick up last month.
Boonpeng Santiwattanatham, new head of the FTI’s Food Processing Industry Club, said the industry had staged a comeback after the coup, thanks mainly to rising domestic demand and exports, particularly to neighbouring countries.
However, growth prospects for the food industry should come into better focus in the second half of the year after the end of the special World Cup soccer competition, which gave a momentary kick to food consumption.