After over two years of fighting the monsoons of the Covid crisis, the Thai economy today has started to improve from opening the country and driving tourism businesses. Instead, faced with the shadow of global economic risk factors. Whether the Russo-Ukrainian War inflation problem interest rate hikes, etc. Dr. Somprawin Manprasert, Executive Vice President Group Chief Executive Officer, Economic Intelligence Center (EIC), Siam Commercial Bank Discussing the overall outlook of the Thai economy amid the volatility that occurs all around.

Inflation spurs the global economy

As the EIC revised its GDP growth forecast from 2.7% to 2.9%, although the number hasn't changed much. But the factors driving the Thai economy have changed. Called the transition from the former exports that used to be good 2 years ago, from now on, exports will not be good and are no longer an important driving force of the Thai economy. The service sector will be a good driver. This can be seen in the forecast of an increase in GDP from the increasing number of tourists. improve service revenue Private Consumption: “EIC views economic activity levels to return to pre-Covid levels in the third quarter of 2023 when tourism continues to improve.”

However, there are still factors that pressure the economic recovery, including:

·        Russo-Ukraine War: Although the GDP numbers of Russia and Ukraine are not large and does not directly affect the world economy, but these two countries have a detrimental effect on other large economies, the European Union, and the United States. that will have a heavy impact on the global economy. In addition, the exports of both countries Although there are not many but is an upstream product of the production chain, such as energy and minerals. Many raw materials and commodities have also increased their prices, such as oil, semiconductors, etc.

·         On the buyer's side Demand pressure began to decline as interest rates stave off inflation. which this year is expected to increase rapidly to the point of slowing growth When the demand of the whole world disappears would affect exports

In the EIC view, global economic factors are not bright. Several bureaus have revised down their global GDP forecasts, meaning the global economy will continue to slow down. resulting in a decrease in exports. moreover, an important market in which Thailand exports 50% of all export products is China. And Europe is in a difficult situation. China, which maintains its Zero Covid policy, has caused periodic lockdowns. As a result, the service manufacturing sector will not operate continuously. If China stops for a long time What will happen next is the halt of production leaves people with no income. Can't come back to buy things, can't sell (decrease in retail sales numbers), people stop producing and reduce employment (unemployment numbers increase) is a downward cycle. Europe is also at risk of entering a recession first. because of its close relationship with Russia-Ukraine If exports and production deteriorate Capacity utilization will also be reduced. Investment will be less accordingly. According to the survey by the Bank of Thailand, increasing costs are the main concern for entrepreneurs.

Inflation in June 2022 hit a record 7.7%, the most worrying is that the Producer Price Index (PPI) rose 14%, resulting in lower margins for producers. or must bear the loss This will result in future investment tends to be less and less

Tourism and agriculture send positive signals

Looking at the tourism sector, EIC has revised its forecast of foreign tourists in 2022 from 5.7 million to 7.4 million, or 3.7 billion baht, due to the increase in travel demand in line with the reduction of international travel measures by many countries. around the world. The group that travels the most is from Asian countries such as Malaysia, India, Saudi Arabia. and European tourists Long address and high spending when the tourism sector is good It has a positive effect on all businesses in the service sector involved in the supply chain such as restaurants, retail, domestic wholesalers, etc.

Dr. Prawin views that the agricultural sector is another important factor that will help drive the economy. from the coast of Latin America And Europe faces drought that affects agricultural products such as corn and soybeans. While the Thai side still has good water conditions. can be cultivated and products such as sugar cane, rubber, and oil palm prices have greatly improved. Therefore, it is estimated that farm income will increase by 10% and the product group that will benefit from the increase in farm income is domestic consumption. (food, drink clothing), travel, vehicles Residential related products and packaging materials

Overall, in 2021-22, the recovery of the business sector remains uneven. but faces high risks from global volatility both commodity prices and the global economic slowdown while some businesses that recover slowly for example, the service sector has positive factors from the gradual opening of the country.

In terms of real income, according to the National Statistical Office in 2021, about 40% of people in the lower group still have negative income. Most are in the manufacturing sector. Wholesale, retail, etc., which in this group There will be families with insufficient income to meet expenses up to 31.8%, meaning an average income of 18,993 baht per month per family. which is a group with high economic vulnerability and groups that are incrementally affected by the current condition the most “expensive items-cheap wages” were middle-class people earning 2-3 thousand baht with regular income. Most of them use cars, so they must pay for expensive gas. which even has the power to pay but there will be less savings left.

What is the trend of interest-baht currency?

The EIC expects the MPC to raise the policy rate to 1% this year and two more next year. Dr. Somprawin said that even now everyone is talking about inflation. After a while, people will become more concerned about a recession. Because the world brought together interest rates to slow down the economy. It is expected that the inflation situation will reach its peak within 1-2 months.

in terms of credit in the past, corporate lending sector grew well from exports. But in the future, personal loans will grow better. Because people earn more and need more money

On the side of the baht Dr. Somprawin views that factors affecting the baht It is the dollar value that when the FED raises interest rates, strengthens the dollar, and the FX market reacts to what is expected. However, when the market realized that the Bank of Thailand was about to raise interest rates This will cause the US-Thai policy interest to spread to narrow. and more tourists will come to Thailand Therefore, the demand for baht has increased. As a result, during the 4th quarter of this year, the baht tends to appreciate in the range of 33.5-34.5 baht.

What are the important geopolitical factors from now on?

There is a question about what is Tail Risk? Somprawin's point of view is the war between China and Taiwan. that will have a much greater impact than the Russo-Ukrainian war Because China is a giant of the global supply chain. Thailand shares a supply chain with China and is located close to the parties.

Retail - How has consumer behavior changed?

EIC expects retail business this year and next year to grow by 11% and 9%, respectively. Covid is a catalyst for changing business models and customer behavior towards online shopping. The mall is a buying experience. Dr. Somprawin mentioned 3 factors that affect the retail business as follows: 1) Recovery in purchasing power and consumer confidence which is not very good at the moment because of the high uncertainty even if the money comes in But be careful with spending. Buy necessities first. 2) Inflation deteriorates the real income of consumers. Entrepreneurs are about to adjust the price of their products. 3) The behavior of consumers has changed. with higher expectations for the quality of products and services They are also more interested in environmental and social issues. (ESG-Environmental, Social and Governance) and consumers have access to new technologies such as AR/VR NFTs Metaverse.

Product groups that will grow are FMCG groups, especially Food & Drink, Healthcare, Home Care/Home & Garden. while electronic products like a computer Not so good because people come back to work at the office. but cell phone enough television

As for the 3 technology trends that will change the service business in the future, they are:

·        Automation Enhancement Shift towards automation such as Modern Automation Tools, AI, and Machine Learning. For example, by 2025, convenience stores in Japan will be fully automated.

·        E-Commerce Evolution Continuous development of e-Commerce to meet the needs of consumers in the digital age, such as Voice search options, trending from China and India, Visual commerce, AI-assisted selling

o   Metaverse by 2024, the Metaverse market capitalization will reach $800 billion from $ 479 billion in 2022, and Gartner estimates that by 2026, 25% of the global population will spend at least an hour a day on Metaverse. Working, shopping, and various forms of entertainment

o   Reattainment Selling products that add more entertainment

o   Omnichannel engagement Communicate through various channels to support different groups of consumers.· 

Dr. Somprawin concluded that Both ESG and Customer Insight technologies are used to create an experience for consumers to interact with our products from the beginning to the end of the purchase process. That is, from knowing the product, deciding, and receiving our product. The design of this experience is very important. which can bring technology to help management to increase business efficiency Design a customer shopping experience and create interactions with customers through online and offline channels To help continue and develop products to meet the needs of all groups of consumers as much as possible.

Source: Seminar "Mission X" The Boot Camp Pf Advanced Corporate Transformation Class 4: Economics & Industry Trend by Dr. Somprawin Manprasert, Executive Vice President Chief Executive Officer, Economic Intelligence Center Group, Siam Commercial Bank Public Company Limited, July 5, 2022