All to play for as the economy looks set to achieve significant growth this year. The key variable is the price of oil which has actually fallen in the last month. Inflation and loss of customer purchasing power currently represent the biggest threat to the government’s careful management of the economy. It comes from the danger of a possible price shock in June or July. The official position, however, is that inflation will still moderate in the latter half of the year and will end 2022 at 4.9%, well ahead of current growth prospects but even this may change in a very volatile situation with both an upside and downside.

There was good news for the Thai economy this week as the government signalled a fuller reopening to foreign tourism from May 1st. Thai banks reported impressive rises in profits, the kingdom’s exports for March surged well beyond expectations and the government’s tax take rose by an impressive 15.6% from September to the period ended on March 31st. This saw the Minister of Finance, Arkhom Termpittayapaisith, send a signal that there would be a need for the government to rein in efforts to prime the economy while his ministry felt confident that economic growth of 3% can be achieved in 2022. However, Thailand faces a significant challenge with a rising prospect, based on the price of oil and commodities, of a cost of living shock hitting the country in June and July which may further wipe out economic growth and keep it mired in 70s era stagflation. At the same time, the outlook is not at all as bleak as other developing countries and even some developed economies, already hit with stagflation and increased probability of recession.

Fiscal Policy Office Director-general, Pornchai Thiraveja (left), disclosed the Ministry of Finance was confident of at least 3% growth in the economy this year. It comes as the Minister of Finance, Arkhom Termpittayapaisith (right) came out to signal that he was reining in government spending as tax receipts rose with plans to end government direct support in favour of a focus on investment. It came in a week which saw strong bank profits, a surge in exports for March and new reopening measures from May 1st. The danger now facing the economy is a price shock from rising inflation in a system where the government controls key price points, sometime in June or July, although all is to play for as oil prices fell back by 10% in the last 30 days.

Thailand’s banks have reported better than expected results for the first quarter of 2022. The reported combined net profits of the country’s banks listed on Bangkok’s Stock Exchange of Thailand (SET), showed a 14.4% rise compared with last year amounting to ฿53.3 billion.

One institution, CIMB Thai Bank, a subsidiary of the Malaysian CIMB Group, saw its profits surge by 211% in the opening three months after the bank’s management pruned operating expenses back by 14% since last year even though the bank’s operating income fell back by 0.8%, leaving it with a net profit for the quarter of ฿1.08 billion.

The main reason for the bank’s strong performance however was a drop in credit losses of 64%.

Krungthai Bank, a state-owned bank, records a 57.4% increase in profits in the first three months of 2022

Among the economy’s top five banks, the performance of the state-owned Krungthai Bank stands out.

Despite being downgraded by S&P Ratings recently, the bank saw its quarterly profits rise sharply when compared to peers by ฿8.78 billion or an improvement of 57.4% when compared to last year.

Banks downgraded as the Thai economy faces a liquidity crisis caused by war and tourism barriers

This also came at the same time as the bank set aside no less than ฿5.47 billion for credit losses despite a fall of 32.1% for the period. 

This was revealed in a report submitted to the Stock Exchange of Thailand, along with the bank’s latest figures.

Kasikorn Bank, also downgraded by S&P Ratings in March, reported a large rise in profitability for the first three months with a 5.5% jump from last year coming in at ฿11.2 billion.

The leading bank, which lends to all sectors in Thailand ranging from consumers to big business, saw a large rise in interest income of ฿3.61 billion or an increase of 12.9% since last year.

Siam Commercial Bank saw profits up by 1%

Krungsri Bank, also known in Thailand as Bank of Ayudhya, saw its profits rise by ฿7.42 billion, a rise of 14% or ฿913 million from last year. The key impacting factor was a lower level of credit losses.

Bangkok Bank posted a 2.8% rise in net profits in the opening 3 months of 2022 with ฿7.11 billion added to earnings.

This included a significant provision against credit losses of ฿6.48 billion which brought the bank’s ratio to anticipated credit losses to non-performing loans to 229%, the healthiest in the industry.

Siam Commercial Bank saw a 1% rise in its bottom line when it reported a net profit of ฿10.2 million.

LH Bank, a division of Land and Houses Financial Group, saw a reduced level of profit in the first three months but still reported a profit of ฿512 million with ฿509 million set aside for expected credit losses.

March exports surge by 19.5% compared to last year, well ahead of analysts’ expectations for the period

There was further good news also this week when export figures for March showed a 19.5% rise from a year earlier. 

The figure beat a Reuters poll of analysts which suggested a marginal rise of only 2.4%.

 While it is significant as exports are a key driver of the Thai economy, it comes with a warning from the Thai National Shippers’ Council that export growth going forward is facing headwinds because of a deterioration in conditions outside the country including a range of problems from supply chain issues to shipping costs.

The figures showed that Thailand recorded $28.86 billion in exports for March driven by electronics and gold shipments against imports of $27.4 billion giving a trade surplus of $1.46 billion.

Imports were driven by crude oil and natural gas supplies as well as electronics.

The Ministry of Commerce is due to host a press conference in the coming week to give further information on this week’s better than expected figures.

Export growth for 2022 still only expected to be 5% for the year as a whole based on industry sources

Shippers meanwhile say that export growth in the second quarter may be more restrained and are suggesting a figure of 4% to 6%.

Currently, most analysts are factoring in a growth rate for exports in 2022 of 5% although, at the beginning of the year, the goal was set at 10% by the Ministry of Commerce and government planners.

Thai Minister of Finance, Arkhom Termpittayapaisith, has come out this week to draw a line on the government’s current efforts to prime the economy through borrowing.

He referenced current support payments schemes which have proved popular and said that they must be reviewed given that economic conditions had returned to normality.

He indicated that he wanted to see the government focus its efforts on budget disbursement and public investment in key projects.

Finance minister Arkhom Termpittayapaisith seeks to rein in the country’s finances as tax revenue showed a surprising 15.6% gain in the opening six months

The finance minister’s stance comes as the Revenue Department has reported an impressive rise in the country’s tax take in the opening six months of the financial year.

Figures show a 6.8% rise in the government’s overall income for the period with a total revenue stream of ฿1.09 trillion to the end of March. The figure is 6.7% ahead of the government’s own projection.

Approximately ฿853 billion of the government’s income came from tax receipts which rose by an impressive 15.6% for the period.

This was despite a cut in excise taxes on oil products agreed by the government in response to the spike in world prices to help consumers this year.

In the opening six months, the Kingdom’s Excise Department collected ฿276 billion, down 1.8% on last year or 5.6% off official estimates.

Details of the government’s income for the six months from October 1st 2021 to March 31st 2022 were given by Pornchai Thiraveja of the Fiscal Policy Office at the Ministry of Finance.

Ministry confident of at least a 3% growth rate

Mr Pornchai said the government was confident that a baseline growth rate of 3% can be achieved this year.

With already rising foreign tourist arrivals and the expectation that this key engine of the Thai economy will power up further after Friday’s announcement, that from May 1st, there will no longer be testing for vaccinated travellers and even with more modest export growth ahead, it would appear that the government’s economic fortunes are improving.

Test and Go scrapped, a giant step by officials that removes testing for incoming air passengers to Thailand

However, there is now one storm cloud on the horizon and that is the rising danger of a further spike in inflation from June or July which could see the kingdom’s inflation rate reach double digits.

It is important to note that the Bank of Thailand still states that inflation will moderate in the latter half of 2022 while there is still a substantial upside for both exports and foreign tourism which are the key engines that drive the country’s GDP.

We have also seen that the kingdom’s working population and banking system are highly resilient although consumer confidence has dropped.

Inflation and rising cost of living is now the biggest threat to the country’s economic prospects. People already feeling the effects of stagflation

This would be an outcome that flies in the face of the recent outlook of the Bank of Thailand and its Monetary Policy Committee which has highlighted its determination to move beyond its statutory function of combating inflation this year in a push to achieve growth.

The current official position is that inflation will come in at 4.9% for the year with an easing expected in the latter months. This is unlikely to be ahead of the current and even more optimistic projected growth rates for the economy which means that Thailand is already suffering from stagflation.

The problem is inflationary pressure driven by rising worldwide price rises even before the February 24th breakout of war in Ukraine and since by heightened oil prices and stiff rises in the price of essential commodities reportedly up by 50% this year as supply cannot meet demand.

Danger of a price shock is growing if government efforts to alleviate rising inflationary pressure fail

Already the effects of the latest inflation wave has seen the real, market price, in the kingdom, at the pump for petrol up by 31.43% and electricity bills up 39.95% but prices for consumers in Thailand have not reflected this with pump prices only rising 15.7% since September 2021 and less well off households benefiting from a string of government supports for electricity bills as part of an effort to protect the economy.

As things currently stand, consumers are only facing a 6.1% rise from May to August in electricity costs, an enviable situation when compared with many western countries where energy price hikes of 25 to 50% have been announced by regulators in the United Kingdom and European Union countries.

These are caused by a spike in oil costs, deregulation and the imposition of new policies to tackle climate change.

Thailand faring better than most developing economies on inflation and people are even better off than some developed economies due to price controls

To put it simply, the average household in Thailand pays ฿749 in electricity costs or $22 while the equivalent in Germany, even for a one-person household, is $444. That’s twenty times more.

Food prices have risen more moderately but the impact of inflationary pressures in Thailand may come as a shock if the government can no longer afford to artificially control prices in the face of market forces.

The concern for the kingdom right now is how the government’s price controls across 46 key staples will cope with sharp pressure when current quarterly stocks run dry or if oil prices go higher and are fed into the controlled system of artificial price supports.

Already food price inflation is running at 6.3% in the kingdom, a situation that is threatened by elevated oil prices and rising inflation in other countries.

Rising inflation in the European Union and United States already impacting the Thai economy, the key factor is still oil prices with all to play for

Both the European Union and the United States are expected, over the next three to six months, to see inflation rise to double-digit figures which is being met stateside by a determined effort, as articulated by Federal Reserve Chairman Jerome Powell, to raise interest rates which is expected to see a double size rate rise in May which is widely anticipated to be followed by another hike later in 2022.

In the short term, this will help to further the rise in the US dollar which will help Thai tourism and boost export competitiveness.

The Thai government will be hoping this tough medicine tempers inflationary pressures in the kingdom’s largest export market although 48% of analysts now feel the US will enter recession in 2023.

The key factor for Thailand continues to be the price of oil and commodities with the ideal for the kingdom being a price of $80 a barrel and an end to the war in Ukraine.

The kingdom’s position is not as bleak as many developing world economies and even some developed ones and is still all to play for with the prospects for growth this year now enhanced.

Oil price has dropped in the last month

In a volatile world market driven by war and events on the ground, there are some estimates that crude could reach $150 a barrel.

Oil is still boss as Thailand’s economy faces a return to 1970s stagflation over the ongoing Ukraine war

On Friday, the price of WTI crude closed $101.75, a drop of 9.65% in a month and off the $123.77 high seen when oil hit a peak in early March.

There is still hope for Thailand’s economy in 2022 but the danger is that an expected inflation tsunami could dwarf any expected growth leaving the country mired in stagflation.

Join the Thai News forum, follow Thai Examiner on Facebook here
Receive all our stories as they come out on Telegram here
Follow Thai Examiner here

Further reading:

Prolonged Ukraine war to see Thai inflation at 6.3%, a stalled economy and a possible downgrade

Travel sector calls for endemic status, scrapping of Thailand Pass and full normality on entry

Oil still boss as Thailand’s economy faces a return to 1970s stagflation over the ongoing Ukraine war

Fears for Thailand’s economy over Ukraine war with rising inflation rates and loss of confidence

Thailand should move more towards a circular economy as the country faces intractable hurdles

Thailand’s economy awaits the fallout from the Omicron surge as projections for 2022 take a dive

Inflationary fears for Thailand more muted than in the United States but planners should prepare

A cautious recovery in 2022 says Bank of Thailand boss but PM strikes a mildy more optimistic note

With Omicron hovering, firms already suffering a cash flow crunch with the economy again in peril

Shaky economic recovery as planners target only a 1% gain in 2021 with rising headwinds in Quarter 4

Economy climbing out ‘of a hole’, foreign firm’s confidence levels rose sharply during October

Another GDP contraction looms as Thailand tries to boost its economic fortunes by spending more

Government borrows more to bring the economy through an extended Covid 19 crisis with GDP flat

Officials switch to prioritising economic recovery as CCSA expected to agree a new Covid approach

Richest man in Thailand says COVID-19 is like a World War, the kingdom could end up a big loser in the end

Foreigners in Thailand have nearly ฿600 billion in the bank as inequality and poverty rise alarmingly

Rising prospect of GDP contraction for 2021 may see government breach the legal public debt limit

A dead mother beside her children and a taxi driver who slept, show us a nation riven by an extended crisis

Economic fears rising as Thailand faces a bigger crisis than 1997 with rising job losses and debt

Baht falling with confidence in Thailand waning as foreign tourism closure and virus drive funds out

Central bank to lower GDP growth forecast as its attention turns to private sector debt management

Loan bill passes but Thai economic prospects are not bright with a 1.8% 2021 GDP gain predicted

Thailand to reopen to ‘big fish’ tourists as a cryptocurrency friendly haven says promotion agency boss

IMF urges government to loosen nation’s purse strings as finances tighten with the tax take down

Failure to pass the ฿500 billion borrowing decree could lead to the dissolution of parliament

Baht to strengthen later in the year even after July as foreign tourists will return says top bank economist

Industry leaders and central bank all warn that foreign tourism must return to avoid a collapse

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

Fact – only 6,556 visitors arrived in Thailand last month compared to 3.95 million in December 2019

Desperate foreign tourism business concerns are clinging to straws as they try to survive the crisis

Strict entry criteria to remain as officials await clarity on the medical status of vaccinated people

Challenge of the virus and closure to tourism leads to major long term changes in the Thai economy

Finance Minister says economy must pivot away from tourism with a switch to S-Curve industries

Steady as she goes economy driven by exports and public investment with a 3.3% growth rate forecast for 2021

Thailand’s tourism boss targets thousands instead of millions as public health is prioritised above all

Thailand unlikely to reopen doors to mass-market tourism before the end of 2021 until after a full vaccination

Strengthening baht predicted as investors bet on a reopening of Thailand to mass tourism in 2021

Economic picture continues to darken as cabinet approves new ฿700 billion loan to plug the gap of higher deficits

Thailand facing a credit crunch as 3rd virus wave craters the kingdom’s economic recovery plans

3rd virus wave now spells not just economic loss but financial danger as kingdom’s debt level rises

Still time to avoid lockdown says Health Minister as 3rd virus wave dwarfs all infections to date

Thai economy is still in reverse despite rising confidence and a virus threatening a 3rd wave

Reopening of Phuket still not officially approved although it is the ideal test for a broader move

Minister urged not to be afraid to borrow in 2021 as fears grow for a quick foreign tourism revival

Economy to rebound as the year progresses driven by exports and a return of mass foreign tourism

Door closing on quick foreign tourism return as economic recovery is delayed to the end of 2022

Phuket’s plan to self vaccinate on hold as Interior Ministry orders private sector out of vaccine deals

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

Fact – only 6,556 visitors arrived in Thailand last month compared to 3.95 million in December 2019

Desperate foreign tourism business concerns are clinging to straws as they try to survive the crisis

Finance Minister says economy must pivot away from tourism with a switch to S-Curve industries