The uncertainties facing the global economy have resulted in a decline in Thailand’s exports. The Thai Industries Sentiment Index (TISI), meanwhile, dropped for the second consecutive month to 92.5 in May due to high production costs and rising policy interest rates.
All components of the index, including purchase orders, sales, and production volume, experienced a decline. The index’s drop to 92.5 represented the second consecutive month of contraction.
Federation of Thai Industries (FTI) Chairman Kriengkrai Thiennukul attributed the index’s decline to several factors. These include global economic uncertainties, high production costs for Thai manufacturers that stemmed primarily from energy costs, policy interest rate rises that have added cost burdens to businesses, and concerns over the setting up of the new government in Thailand.
The forward sentiment index for the next 3 months stood at 104.3 – also a decline from the previous month’s level. Kriengkrai explained the decline resulted from business operators’ concerns about the incoming government’s policy on raising the minimum wage, which is expected to raise the cost for Thai businesses, especially small and medium enterprises or SMEs. The private sector has also voiced concerns about the minimum wage policy curbing foreign investments.
Kriengkrai said the private sector wanted the state sector to issue measures in assistance of SMEs that are impacted by the raising of the policy interest rate, which added more debt burden and reduced the debt repayment capacity at these businesses. He suggested measures such as support for low-interest loans to increase businesses’ liquidity, debt restructuring, adjustment of loan guarantee conditions for greater lending flexibility, and encouraging businesses to leverage the various FTAs Thailand has with trade partners to boost their export values.
The FTI chairman noted that on the political front, a swift establishment of the new government is needed to prevent a political vacuum and to foster confidence for investors. He noted that foreign investors are awaiting clarity about the setting up of the new government, adding that if the new administration only comes into office in late 2023, GDP growth for the year could dwindle to 2.5% instead of the predicted 3.5%.(NNT)