Thai consumers are once again opening their wallets, as private consumption rebounds to its highest annualised level since 2013. FTCR data suggest consumer spending will continue to stabilise, bolstering the country’s broader economic recovery.

From the top-down macroeconomic perspective, it appears that Thailand has finally shaken its economic malaise. The country’s gross domestic product expanded by 4.8 per cent year on year in the first quarter, the fastest pace in five years, and official projections for the full year have been revised up to the range of 4.2 to 4.7 per cent — still dead last among the Asean’s five-largest developing economies, but as competitive as Thailand has been in a decade.

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Yet beyond the red-hot tourism sector, the economy continues to struggle. Excluding foreign tourism receipts, Thailand’s GDP grew just 3 per cent year on year in the first quarter. 

Tepid consumer demand has long been a leading culprit, as well as a victim, of the slow economy. Since 2013, private consumption has fallen from 52.3 per cent of GDP to 48.6 per cent for the one-year period ending March 2018. Household spending growth has trailed GDP since 2015, and arguably since 2006 if the recoveries following the 2008-09 global financial crisis and 2011 floods are ignored.

However, Thai consumers are regaining their appetites. Household spending accelerated in the first quarter, to 3.6 per cent year on year from 3.4 per cent previously, and has improved gradually since the political turmoil of 2013-14, reverting to its long-term average. 

Historical context here is necessary. Thai consumers may love cars and smartphones, but private consumption has rarely outpaced GDP in the export driven economy. Since the end of the country’s last boom days, under the Thaksin Shinawatra administration (2001-06), private consumption has grown at a long-term average of just 2.4 per cent. In fact, going as far back as 2000, it has averaged 3.6 per cent — exactly where it stood in the first quarter.

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FTCR data confirm that private consumption has reached an inflection point. Our Discretionary Spending Index held steady in the first quarter at 59.3, indicating rising levels of purchases against a year earlier. Sales of new cars jumped 14.8 per cent year on year in the first quarter, a strong indication of recovering consumer demand.

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Similarly, our Household Income Index shows a rise in incomes over the previous year. While these readings are below Thailand’s own 2014 highs, they have rebounded from low points hit in mid-2017. Meanwhile, our trackers for consumer borrowing have also risen since early 2017, when they touched their lowest levels. 

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This is not to say consumer confidence has rocketed. On the streets in Bangkok, working people continue to feel negatively about the economy. Mun mai koi di thaorai — “it’s not very good” — is the typical refrain. 

More than half the 1,000 Thai consumers surveyed by FTCR in the first quarter rated the economy as bad (35.6 per cent) or very bad (15.1 per cent), compared with just 11.2 per cent who scored it favourably. While opinion has improved somewhat since hitting bottom in mid-2015, it remains broadly negative.

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Meanwhile, FTCR’s forward-looking Economic Sentiment Index slipped to 51.4 in the first quarter, a reading that signals only marginal optimism about the direction of the economy.

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As a whole, FTCR data broadly reflect a modest rise in household spending and consumer confidence over the past 12 months. With private consumption growth already back to its long-term average, we believe additional small improvements are likely over the coming quarters, assuming no shocks from either domestic politics or the increasingly tumultuous global environment. 

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.

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