BOT indicates Thai economy slows down in February, tourism declines, manufacturing sector has not recovered

The Bank of Thailand revealed that the Thai economy in February tended to slow down, with the tourism sector declining and the manufacturing sector not recovering.

On March 31, 68, Ms. Pranee Sutthisri, Senior Director of the Macroeconomic Department at the Bank of Thailand (BOT), revealed that the Thai economy slowed down in February compared to the previous month. This was due to the tourism-related service sector, as a decrease in the number and revenue from foreign tourists, coupled with a decline in industrial production, particularly in the chemical and petroleum sectors, and a decrease in private sector investment after a period of acceleration. However, exports increased in several categories.

In particular, the automotive, electronics and precious metals categories have improved, while private consumption has improved, and government spending has continued to expand due to both regular and investment expenditures from the central government.

economic stability

The overall inflation rate decreased slightly from the previous month, mainly due to the energy category, resulting from a high base effect and lower gasoline prices following the decline in global oil prices.

Core inflation increased due to higher prices of processed foods, cooking ingredients, and public transportation fares. The current account surplus widened mainly due to the trade balance, while the services, income, and transfers surplus decreased due to lower tourism revenue. The overall labor market improved slightly compared to the previous month.

Private consumption, as measured by the seasonally adjusted private consumption indicator, increased from the previous month, mainly driven by non-durable goods, specifically electricity consumption and fuel sales.

However, the semi-durable goods category was stable, with textile and garment import volumes decreasing, while semi-durable goods sales increased. The durable goods category decreased, in line with passenger car sales and motorcycle registrations.

While pickup truck sales increased slightly, the service category decreased from the hotel and restaurant category, in line with the decrease in the number and income from foreign tourists. As for consumer confidence, it decreased slightly due to concerns about US trade policy, geopolitical conflicts, and the cost of living that remains high.

Private sector investment, as measured by the seasonally adjusted indicator, declined from the previous month across all major categories. Investment in machinery and equipment decreased after a period of significant acceleration, driven by net imports of several capital goods, including computers and office equipment, electrical equipment, and specialized machinery.

For the vehicle category, it decreased significantly from the passenger car category, and the construction category decreased according to the construction area permitted from both residential and non-residential categories, consistent with the overall real estate market situation that is still sluggish and some businesses are delaying investment to wait and see the direction of trade policies of major economic countries.

The number and revenue from foreign tourists, after being seasonally adjusted, decreased from the previous month, declining due to a surge in Chinese and Malaysian tourists following the Lunar New Year festival. Concerns about the safety of Chinese tourists also contributed to the decline. However, tourist numbers from several other nationalities, such as Japan, India, and Russia, continued to grow.

Merchandise exports The value of merchandise exports excluding gold after removing seasonal factors increased from the previous month, following exports.

(1) Automotive category, including personal passenger cars to Australia and ASEAN, pickup trucks to Australia, and tires to the US.

(2) Electronics category in many products such as computers, electronic circuit boards and parts, and hard disk drives, following the up cycle of electronics products and the acceleration of some exports to the United States due to concerns about import tariffs.

(3) Precious metals category, following white gold exports to India from India's measure to reduce import duties on precious metals, and it is expected that the positive results will end in the first quarter as Indian customs tighten import conditions since the beginning of March. Petroleum exports decreased following exports of refined oil after accelerating in the previous month.

Imports: The seasonally adjusted value of imports excluding gold decreased from the previous month, primarily due to a decline in the fuel category (due to lower crude oil imports) and the capital goods category (due to lower imports of machinery and electrical equipment). However, the raw materials and intermediate goods category increased, driven by higher imports of electronic components from Taiwan and computer equipment from China.

Industrial Production: The seasonally adjusted industrial production index declined from the previous month, particularly export-oriented production, which fell below 30%. This was mainly due to a slowdown in fertilizer production in the chemicals sector, as manufacturers await clarity on fertilizer price control measures, and in the petroleum sector, which had accelerated production in the preceding period. Meanwhile, export-oriented production, which exceeded 60%, also declined, mainly in the hard disk drive sector, due to inventory liquidation.

However, production in some categories improved in line with exports, including the electronic circuit board and parts category, following the recovery of the electronic cycle, and the automotive category, mainly following the production of passenger cars. However, production in the automotive category remains low.

The service sector, excluding gold trading and seasonally adjusted, declined from the previous month. Tourism-related service activities decreased in both hotels and restaurants, as well as passenger transportation, consistent with the number and revenue from foreign tourists. Similarly, manufacturing-related service activities decreased in both trade and goods transportation, reflecting declines in consumer goods sales and industrial production.

Farmers' income expanded compared to the same period last year, mainly due to increased production. Sugarcane, rubber, and rice production increased thanks to favorable weather conditions. Meanwhile, prices contracted slightly, particularly for rice and sugarcane due to increased production volume, as well as for cassava due to decreased demand for cassava chips from China.

Government spending, excluding transfers, expanded compared to the same period last year, driven by both current and capital expenditures of the central government. Current expenditures increased due to disbursements of pensions, personnel compensation, and healthcare for civil servants.

Investment expenditure expanded in line with disbursements from public utilities and transportation agencies, while investment expenditures of state enterprises contracted from investments in telecommunications and energy infrastructure.

In terms of financial conditions, business fundraising overall improved from the previous month, mainly due to fundraising through the credit and bond markets. Net fundraising through the credit market increased from the manufacturing, real estate, infrastructure, and holding company sectors.

Although the trade sector contracted from the previous month, fundraising through the debt instrument market increased in line with businesses related to food and agriculture, including the telecommunications business group, mainly borrowing for the rollover of matured bonds.

As for the cost of fundraising through debt instruments at the end of February 2568, short-term and long-term Thai government bond yields have decreased in line with the policy interest rate and investor expectations that the Monetary Policy Committee (MPC) will lower interest rates in the future.

The Thai baht exchange rate against the US dollar in February 2568 showed an average appreciation of the baht after trade tensions between the US and China were not as severe as the market had anticipated. However, in March 2568 (data up to March 25, 2568), the baht remained relatively stable, following the US Federal Reserve's decision to maintain interest rates and the US's trade policies being in line with market expectations. The average Nominal Effective Exchange Rate (NEER) index increased in February as market concerns about US-China trade policies eased.

Economic stability: The overall inflation rate decreased from the previous month, mainly due to the energy category. This was a result of a high base in the previous year and lower gasoline prices following the drop in global crude oil prices. Meanwhile, the fresh food inflation rate increased due to higher pork prices. The core inflation rate rose due to higher prices of processed foods, cooking ingredients, and public transportation fares after the end of the government's fare exemption measure for the BTS and bus to mitigate the PM 2.5 dust problem.

The overall labor market improved slightly from the previous month, driven by a decrease in the number of insured persons under the 33-symbol scheme in the service sector. Employment in the manufacturing sector remained stable. The ratio of new unemployment benefit claims to the total number of insured persons decreased, particularly in the automotive and transportation industries. However, the continuously increasing ratio of unemployment benefit claims to the total number of insured persons needs to be monitored, as it may reflect increasing difficulty in finding new jobs within the social security system.

The current account surplus increased from the previous month, mainly due to the trade surplus driven by increased exports. Meanwhile, the services, income, and transfers surplus decreased due to lower revenue from foreign tourists.

Business Stability and Financial Position (Q4 2567): The overall performance of listed companies on the Stock Exchange of Thailand (SET and mai), excluding financial institutions, remained stable compared to the previous quarter. The overall Operating Profit Margin (OPM) was 6.8%, unchanged from the previous quarter. Manufacturing businesses improved in almost all categories, while tourism-related services remained stable.

However, other services businesses not related to tourism (Other services) deteriorated in all business categories, especially the construction business, while the overall Interest Coverage Ratio (ICR) was 4.2 times, flat from the previous quarter. In terms of liquidity and debt, the Current Ratio (CR) and Debt to Equity ratio (DE) were flat from the previous quarter at 1.6 times and 0.7 times, respectively.

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