Thai consumer confidence falls again due to protracted unrest

by Reuters
Thursday, 3 April 2014 05:15 GMT

(Adds details, comments)

* Consumer confidence down for 12th straight month - survey

* Political uncertainty hurting domestic demand, investment

* Economic structure 'quite weak' - professor

* Tourism income down, Jan-March arrivals drop 7.3 pct y/y

By Pairat Temphairojana and Kitiphong Thaichareon

BANGKOK, April 3 (Reuters) - Thailand's consumer confidence slipped to its lowest in nearly 12.5 years in March, a survey showed on Thursday, underscoring again the impact of prolonged political unrest on Southeast Asia's second-biggest economy.

As months of anti-government protests in Bangkok continue, Thailand is losing its image of proving resilient to turmoil. The continuing tension and uncertainty have hit consumption and investment as well as scared some away tourists from the capital of the "Lands of Smiles".

The University of the Thai Chamber of Commerce's consumer confidence index dropped to 68.8 in March from 69.9 in February. The index, which has fallen 12 straight months, is at its lowest since November 2001.

"The consumer confidence index is tied pretty closely with the political situation," said Thanavath Phonvichai, an economics professor at the university.

"The Thai economic structure is quite weak and fragile. There's an increasing risk for the economy to expand less than 2 percent, with more possibility of flat growth or a contraction," he said.

The survey showed that consumers' readiness to spend on new cars fell to its lowest level in 27 months and on new houses to the lowest mark in 105 months. Thailand is a regional production and export base for global carmakers. Domestic auto sales dropped nearly 45 percent in February compared with a year earlier.

"We believe that consumer confidence over the next two years, at least 2014, will still see a decline," Luxmon Attapich, senior country economist with the Asian Development Bank, said this week. "Delays in rice payment to farmers and high household debt mean household consumption is not a hope this year."


Tourism, which accounts for about 10 percent of the Thai economy, is taking a hit, with arrivals down 7.3 percent in January-March from a year earlier, according to the Tourism Council of Thailand. But the sector is expected to improve from April, thanks to the mid-March lifting of a state of emergency covering Bangkok.

"The lifting is positive for the country. Political factors are very important for tourists since they want to feel safe," Pornthip Hirunkate, vice president of the Tourism Council of Thailand, said.

The council estimated that visitor cancellations cut Thai tourism earnings by 50.8 billion baht ($1.57 billion) in the first quarter and would cause a further 31.9 billion baht loss in the second quarter. But it forecast tourist numbers for April-June will rise about 4 percent from a year earlier.

For all of 2014, it predicts arrivals of 28.13 million, up 5.36 percent, compared with an increase of nearly 20 percent in 2013.

Bangkok's average hotel occupancy rate before the emergency decree was lifted was 57 percent and is currently around 65 percent, Pornthip said.

A Feb. 2 general election was disrupted by protesters and later annulled by a court, leaving Prime Minister Yingluck Shinawatra with a caretaker government with limited powers to spend. It may be a long time before a new functioning administration can be installed.

With tensions remaining, growth estimates for Southeast Asia's second largest economy after Indonesia have been cut steadily. The central bank recently reduced its 2014 forecast to 2.7 percent, compared with 4.8 percent seen last October before protests began. On Monday, it said it expected a quarterly contraction in January-March.

In 2013, growth was 2.9 percent, far below the previous year's 6.5 percent as the country rebounded from bad floods. ($1 = 32.4 baht) (Writing by Orathai Sriring and Viparat Jantraprap; Editing by Richard Borsuk)

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