The confidence index of Thailand’s industrial sector for April has dropped to 86.2, the lowest since last December, due to concerns over rising production costs, according to President of the Federation of Thai Industries (FTI) Kriengkrai Thiennukul.
Kriengkrai explained that the combined purchase orders, sales and performance of the industrial sector have all dropped, whereas production costs, including raw materials, energy and transport costs have been increasing, all of which are compounded by rising inflation and household debt, making consumers more cautious about their spending.
During the Songkran holidays last month, he said that production in the whole sector fell, coinciding with the escalation of the war in Ukraine, which has impacted the global economy and the prices of fertiliser, metals and raw materials for animal feed.
Regarding the export sector, Kriengkrai said that the problem of the shortage of cargo containers and shipping space for exports has not eased and is putting pressure on the sector. Nonetheless, the weakening baht currency, at a five year low, may help to increase the competitiveness of Thai exports.
He expressed concern, however, that the weakening of the baht will increase the cost of imports, such as oil, which will further drive inflation.
The FTI chairman is still concerned about the diesel price, currently pegged at 32 baht per litre, but which may increase to 35 baht per litre.
While praising the government’s plan to cap the diesel price ceiling at 35 baht/litre, by cutting excise tax by five baht/litre for two months, he said that it would be much better for consumers and businesses if the price of diesel could continue to be capped at 32 baht/litre, with the excise tax cut extended to four months.
To spur the economy, he recommended that the government rolls out the 5th phase of the co-payment scheme and extends the “We Travel Together” scheme, to promote domestic tourism and stabilise the currency. He would also like to see further easing of travel restrictions for foreign tourists.
Expressing concern over small and medium enterprises, many of which have gone bankrupt during the two years of COVID-19 pandemic, Kriengkrai suggested that the government should provide funding to increase their liquidity.
The National Economic and Social Development Council (NESDC) has recently decided to cut Thailand’s GDP growth projection for 2022 to between 2.5% and 3.5%, or an average of 3%, from earlier projection of between 3.5% and 4.5%, due to uncertainties over the conflict in Ukraine. However, growth in the first quarter of this year was recorded at 2.2%, thanks to the easing of lockdown measures and the resumption of various economic activities.
