Ministry of Finance Economic Situation Weekly Report as of October 15, 2021

Oct 19, 2021 | view 1,276

Ministry of Finance - Fiscal Policy Office Weekly Economic Situation Report as of October 15, 2021:
1. The Industrial Confidence Index (TISI) for September 2021 increased to 79.0 from 76.8 in the previous month.
2. Domestic cement sales in September 2021 contracted by -9.5% compared to the same period last year.
3. The liquidity asset ratio of commercial banks in August 2021 was 1.86 times the legally required liquidity assets.
4. Singapore's GDP for Q3 2021 (preliminary) grew by 6.5% compared to the same period last year.

Thai Economic Indicators

The Industrial Confidence Index (TISI) for September 2021 increased for the first time in six months to 79.0 from 76.8 in the previous month.

This increase was primarily supported by the easing of the COVID-19 outbreak as the number of infections began to decline, allowing the government to gradually relax control measures. This has led to a gradual recovery in domestic economic activities. Additionally, the implementation of the Bubble and Seal measures in factories has reduced infections in industrial settings, positively impacting production resumption. Furthermore, the announcement of the country reopening in Q4 is expected to boost confidence among the public and businesses. However, close monitoring of the flooding situation is necessary as it affects raw materials in the food industry and transportation, along with rising raw material costs due to energy prices, which are significant risk factors for the industrial recovery for the remainder of the year.

Domestic cement sales in September 2021 contracted by -9.5% compared to the same period last year, and when seasonally adjusted, it contracted by -3.3% compared to the previous month.

In September 2021, the construction sector was affected by flooding in several provinces, hindering construction activities. Additionally, there were transportation issues for construction materials, leading to continued contraction in cement sales. The ongoing COVID-19 outbreak is expected to prevent the construction sector and related businesses from recovering adequately. However, the lifting of COVID-19 control measures in construction worker camps and the disbursement of the 2022 budget are anticipated to positively support the construction sector in Q4.

Financial Sector Indicators
The liquidity asset ratio of commercial banks in August 2021 was 1.86 times the legally required liquidity assets.

The total outstanding liquidity assets of commercial banks in July 2021 amounted to 5.2 trillion baht, slightly increasing from the previous month. The Bank of Thailand has adjusted the liquidity asset maintenance criteria for commercial banks from the previous requirement of maintaining at least 6% of deposits to at least 100% (or 1.0 times) of the estimated net cash outflow in crisis conditions (Liquidity Coverage Ratio: LCR) since January 2016.

Source: Bank of Thailand

International Economic Indicators

United States

The inflation rate in September 2021 was 5.4% year-on-year, up from 5.3% in the previous month, driven by significant increases in housing, food, new vehicles, and energy prices.
The number of initial unemployment claims for the week of October 3-9, 2021, was 293,000, continuing to decline from the previous week's 329,000, lower than the market's expectation of 319,000, marking the lowest level since the pandemic began in March 2020, reflecting a recovery in the U.S. labor market due to increased labor demand and a slowdown in layoffs, although some workers remain hesitant to return due to concerns about the outbreak.

China

Exports in September 2021 grew by 28.1% year-on-year, accelerating from 25.6% in the previous month, driven by strong global demand. However, China continues to face pressures from energy shortages, supply chain bottlenecks, and rising daily new infections in some areas.
Imports in September 2021 grew by 17.6% year-on-year, slowing from 33.1% in the previous month, with declines in semiconductor and industrial metal imports due to environmental control policies and slowing production.
The trade balance in September 2021 recorded a surplus of $66.7 billion, increasing from a surplus of $58.3 billion in the previous month.
The inflation rate in September 2021 was 0.7% year-on-year, down from 0.8% in the previous month, marking the lowest level since April 2021, primarily due to decreases in food, transportation, communication, and household goods and services prices.

European Union

Industrial production in August 2021 grew by 5.1% year-on-year, slowing from 8.0% in the previous month, but still exceeding market expectations of 4.7% growth.

Australia

The unemployment rate in September 2021 was 4.6% of the total labor force, slightly increasing from 4.5% in August 2021 due to lockdown measures in various states to control COVID-19.

Singapore

GDP for Q3 2021 (preliminary) grew by 6.5% year-on-year, down from 15.2% in the previous quarter, or 0.8% growth compared to the previous quarter (seasonally adjusted).

Indonesia

Retail sales in August 2021 contracted by -2.1% year-on-year, improving from -2.9% in the previous month, primarily due to declines in automotive parts sales.
Exports in September 2021 grew by 47.6% year-on-year, down from 64.1% in the previous month.
Imports in September 2021 grew by 40.3% year-on-year, down from 55.3% in the previous month.
The trade balance in September 2021 recorded a surplus of $4.4 billion, down from a surplus of $4.7 billion in the previous month.

Malaysia

Retail sales in August 2021 contracted by -7.5% year-on-year, improving from -8.1% in the previous month, primarily due to declines in automotive sales.
Industrial production in August 2021 contracted by -0.7% year-on-year, improving from -5.1% in the previous month, primarily due to electricity production declines.

Philippines

Exports in August 2021 grew by 17.6% year-on-year, accelerating from 13.8% in the previous month.
Imports in August 2021 grew by 30.8% year-on-year, accelerating from 29.5% in the previous month.
The trade balance in August 2021 recorded a deficit of $3.6 billion, improving from a deficit of $3.7 billion in the previous month.

South Korea

The Bank of Korea decided to maintain the policy interest rate at 0.75% per annum in September 2021. The unemployment rate in September 2021 was 3.0% of the total labor force, increasing from 2.8% in the previous month, with continuous job growth for seven months, adding over 670,000 positions, reflecting a strong recovery in the labor market.

India

Industrial production in September 2021 grew by 11.9% year-on-year, accelerating from 11.5% in the previous month, partly due to a low base and the Indian economy beginning to recover from the pandemic.
The inflation rate in September 2021 was 4.35% year-on-year, down from 5.3% in the previous month, marking the third consecutive month of decline, the lowest level since May 2021.

United Kingdom

The unemployment rate in August 2021 was 4.5% of the total labor force, down from 4.6% in July 2021, marking the lowest unemployment rate in the UK for 2021.
Industrial production in August 2021 grew by 3.7% year-on-year, slowing from 4.4% in the previous month, but still exceeding market expectations of 3.1% growth.

Money Market and Exchange Rate Indicators
The SET index slightly increased from the previous week, in line with other regional stock markets that also rose. On October 14, 2021, the index closed at 1,640.97 points with an average trading value of 87,008.08 million baht per day from October 11-14, 2021. Foreign investors and securities company accounts were net buyers, while domestic retail and institutional investors were net sellers. From October 11-14, 2021, foreign investors net bought securities worth 6,027.46 million baht.

The overall yield on government bonds increased by 1 to 13 basis points. This week, investors participated in the auction of 3-year and 31-year government bonds, with demand at 1.66 and 1.48 times the auction amount, respectively. From October 11-14, 2021, foreign capital inflow in the bond market was net 3,297.11 million baht, and from the beginning of the year until October 14, 2021, foreign capital inflow in the bond market was net 68,716.00 million baht.

The Thai baht appreciated from the previous week, closing at 33.21 baht per US dollar on October 14, 2021, an appreciation of 1.74% from the previous week. This aligns with the appreciation of the euro, ringgit, Singapore dollar, and yuan against the US dollar, while the yen and won depreciated against the US dollar. The baht appreciated more than other major currencies in the region, resulting in the NEER index appreciating by 1.77% from the previous week.