Fiscal Policy Office Weekly Economic Report as of October 29, 2021

Oct 30, 2021 | view 1,863

The Fiscal Policy Office - FPO reports the weekly economic situation as of October 29, 2021, as follows:
1. The Manufacturing Production Index (MPI) for September 2021 contracted by -1.3% year-on-year.
2. Domestic sales of steel and steel products in September 2021 remained stable at 0.0% year-on-year.
3. The Agricultural Production Index in September 2021 grew by 4.9% compared to the same period last year, while the Agricultural Price Index contracted by -7.6% year-on-year.
4. Sales of passenger cars in September 2021 contracted by -13.5% year-on-year.
5. Sales of commercial vehicles in September 2021 contracted by -20.2% year-on-year.
6. In September 2021, the number of foreign tourists entering the country was 12,237, growing by 100.0% year-on-year.
7. The value of exports in September 2021 grew by 17.1% compared to the same period last year, while the value of imports grew by 30.3% year-on-year.
8. Total budget disbursement in September 2021 contracted by -6.1% year-on-year.
9. The government collected net revenue (after allocation to local governments) in September 2021, growing by 14.8% year-on-year.
10. The government's cash-based fiscal position in September 2021 recorded a deficit of 8,782 million baht.
11. Public debt outstanding at the end of September 2021 was 57.98% of GDP.
12. The value-added tax collected by the government at constant prices in September 2021 grew by 8.6% year-on-year.
13. Tax from real estate transactions in September 2021 contracted by -6.0% year-on-year.
14. The GDP of the United States in Q3 2021 grew by 4.9% year-on-year.
15. The GDP of South Korea in Q3 2021 grew by 4.0% year-on-year.

Thai Economic Indicators
The Manufacturing Production Index (MPI) for September 2021 contracted by -1.3% year-on-year but grew by 8.0% compared to the previous month after seasonal adjustments.

The production situation in September 2021, although still contracting, improved from the previous month, particularly in key industries such as electronics parts and circuit boards, basic iron and steel, and air conditioning and components, which grew by 13.1%, 13.6%, and 20.2% year-on-year, respectively. The significant factors include the easing of the COVID-19 pandemic situation and the acceleration of vaccination for the public and workers in the industrial sector, allowing the government to relax economic activities further. Additionally, the policy to reopen the country on November 1, 2021, will be a crucial supporting factor for the continued growth of the MPI in the remaining months of the year.

Source: Office of Industrial Economics

Domestic sales of steel and steel products in September 2021 remained stable at 0.0% year-on-year but grew by 4.2% compared to the previous month after seasonal adjustments.

The domestic steel sales improved, primarily due to the continuous expansion of steel used in industries, especially hot-rolled and cold-rolled steel, which grew by 11.1% and 111.2% year-on-year, respectively. However, steel used in construction, particularly rebar and wire, continued to contract. Nevertheless, the gradual easing of economic activities and the policy to reopen the country to welcome tourists will help the overall economy recover more.

Source: Office of Industrial Economics

Sales of passenger cars in September 2021 totaled 25,255 units, contracting by -13.5% year-on-year but showed a strong growth of 58.1% compared to the previous month after seasonal adjustments.

This is partly due to the easing concerns over the COVID-19 pandemic, which has led to a recovery in consumer confidence. Additionally, the production situation has improved with increased availability of semiconductors or chips. However, flooding in several areas has caused damage to people's property and agricultural products, resulting in limited purchasing power recovery.

Sales of commercial vehicles in September 2021 totaled 38,867 units, contracting by -20.2% year-on-year but grew by 38.7% compared to the previous month after seasonal adjustments, with sales of one-ton pickup trucks contracting by -21.0% year-on-year.

Although sales of commercial vehicles are still contracting, there is an improving trend from the previous month due to the government's easing of lockdown measures since September 1, 2021, allowing the public to engage more in economic activities and increasing confidence in future income. Additionally, domestic car manufacturers have been able to sell more vehicles due to increased availability of chips and parts, and financial institutions have started to ease their approval processes. Furthermore, the upcoming reopening of the country to welcome tourists on November 1, 2021, will help boost revenue for tourism-related businesses, thereby increasing domestic car sales in the future.

Source: Toyota Motor Thailand Co., Ltd. and the Federation of Thai Industries (FTI)

The Agricultural Production Index in September 2021 grew by 4.9% compared to the same period last year or a contraction of -2.7% compared to the previous month after seasonal adjustments.

When considering the production categories in September 2021, agricultural production expanded in the major crop and livestock categories by 7.0% and 1.2%, respectively, while production in the fisheries category contracted by -3.8%. Key agricultural products with increased production include animal feed corn, fruit crops, and cassava, while significant products with decreased production include white shrimp.

The Agricultural Price Index in September 2021 contracted by -7.6% compared to the same period last year or a contraction of -0.5% compared to the previous month after seasonal adjustments.

When considering the price categories of agricultural products in September 2021, the Agricultural Price Index contracted in all product categories, with major crops, livestock, and fisheries contracting by -7.7%, -7.3%, and -10.5%, respectively. Key agricultural products with increased prices include cassava, animal feed corn, palm oil, and chicken eggs, while products with decreased prices include paddy rice, pigs, fruit crops, and white shrimp.

Source: Office of Agricultural Economics

In September 2021, the number of foreign tourists entering Thailand continued to be affected by the global COVID-19 pandemic, while the number of Thai visitors showed signs of recovery as domestic infections began to decline.

In September 2021, the number of foreign tourists under the Special Tourist Visa (STV), Thailand Privilege Card holders, business travelers, and health tourists entering the country was 12,237, slightly down from the previous month, resulting in a year-on-year growth of 100% due to a low base effect. Most tourists came from the United States, Israel, Germany, the United Kingdom, and France. In Q3, there were 45,398 tourists benefiting from the Phuket Sandbox project.

Meanwhile, domestic tourism reflected the number of Thai visitors in September 2021, which stood at 2.2 million, contracting at a slower rate of -80.6% year-on-year. After seasonal adjustments, it showed a strong growth of 136.7% due to the improving COVID-19 situation in the country. In Q3, the number of Thai visitors was 4.0 million, which again contracted significantly by -87.8% due to the impact of the third wave of infections combined with a high base effect from the previous year.

Source: Ministry of Tourism and Sports

The value of exports in September 2021 was 23,036 million USD, representing a growth of 17.1% compared to the same period last year, marking the seventh consecutive month of growth.

Key products that continued to support exports in that month included automobiles and parts (4.9%), computers and components (22.6%), oil-related products (61.0%), machinery and components (32.8%), electrical circuit boards (16.3%), fruits such as fresh longan (73.8%) and fresh mangoes (55.9%), cassava products (44.4%), rice (33.8%), rubber (83.6%), canned and processed fruits (29.3%), and pet food (23.6%). When considering the main trading partners of Thailand, exports to all major markets grew, especially to the United States, China, Japan, the European Union, and South Asian countries, particularly India, which showed continuous growth rates of 20.2%, 23.3%, 13.2%, 12.6%, and 76.1% year-on-year, respectively. The export value in the first nine months of 2021 grew at an average rate of 15.5% year-on-year.

The value of imports in September 2021 was 22,426 million USD, continuing to grow at a high rate of 30.3% compared to the same period last year.

This growth was seen across all major import categories, including fuel (43.9%), capital goods (16.1%), raw materials (44.6%), consumer goods (22.2%), and vehicles and equipment (16.2%). The import value in the first nine months of 2021 grew at an average rate of 30.9% year-on-year. The trade balance in September 2021 recorded a surplus of 609.8 million USD, resulting in a cumulative trade surplus of 2,016.8 million USD in the first nine months of 2021.

Total budget disbursement in September 2021 amounted to 302,723 million baht, contracting by -6.1% year-on-year. This brings the total disbursement for the fiscal year 2021 to 3,208,653 million baht, growing by 1.3%, with a cumulative disbursement rate of 91.9%.
(1) Current year expenditures amounted to 279,773 million baht, contracting by -4.3% year-on-year, with a cumulative disbursement rate of 91.7%. This is divided into (1.1) Current expenditures of 211,730 million baht, contracting by -0.04% year-on-year, with a cumulative disbursement rate of 96.4%, and (1.2) Investment expenditures of 68,044 million baht, contracting by -15.6% year-on-year, with a cumulative disbursement rate of 70.9%.
(2) Previous year expenditures amounted to 22,950 million baht, contracting by -23.4% year-on-year, with a cumulative disbursement rate of 95.9%.

The government collected net revenue (after allocation to local governments) in September 2021 amounting to 258,332 million baht, growing by 14.8% year-on-year. This brings the total revenue collection for the fiscal year 2021 to 2,369,925 million baht, contracting by -0.7% year-on-year.
Revenue growth was driven by corporate income tax collection, which grew by 21.8% year-on-year, and value-added tax, which grew by 11.4% year-on-year.

Source: Revenue Department, calculated by FPO

The government's cash-based fiscal position in September 2021 showed a budget deficit of 8,782 million baht, resulting in a cumulative budget deficit of 767,188 million baht for the fiscal year 2021, with an ending cash balance of 588,747 million baht.

When combined with the off-budget surplus, the cash balance before borrowing showed a deficit of 28,223 million baht. In this month, the government borrowed 61,182 million baht, resulting in a post-borrowing cash deficit of 89,405 million baht. The ending cash balance stood at 588,747 million baht.

Public debt outstanding at the end of September 2021 totaled 9,337,543 million baht, or 57.98% of GDP, and compared to the previous month, it showed a net increase of 178,029.83 million baht.

The public debt situation in Thailand is considered stable, as reflected by the public debt-to-GDP ratio remaining below the fiscal discipline framework set at a maximum of 70% of GDP. Most public debt is long-term, with 86.4% of the total public debt being long-term and 98.2% being domestic debt.

Source: Public Debt Management Office

The value-added tax collected by the government at constant prices in September 2021 grew by 8.6% year-on-year, but contracted slightly by -0.2% compared to the previous month after seasonal adjustments.

This growth was partly due to the value-added tax collected from imports, which grew well due to a low base effect from the previous year, and the continued strong growth in imports. Meanwhile, the value-added tax collected from domestic spending contracted due to a high base effect from the previous year, which included a special factor of 3,582 million baht, combined with the easing COVID-19 pandemic situation. However, flooding in several areas has limited the recovery of purchasing power.

Tax from real estate transactions in September 2021 contracted by -6.0% year-on-year but grew by 3.4% compared to the previous month after seasonal adjustments.

The collection of tax from real estate transactions in September 2021, although still contracting, improved from the previous month, particularly the withholding tax from real estate sales, which improved from the previous month after the government gradually eased pandemic control measures, allowing economic activities to resume more, positively impacting buyer confidence. In the future, there are positive factors from the announcement to reopen the country to welcome foreign tourists on November 1, 2021, and the easing of LTV measures by the Bank of Thailand until the end of 2022, which will help the real estate sector and related businesses recover more.

Source: Revenue Department, calculated by FPO

Foreign Economic Indicators
United States

GDP in Q3 2021 grew by 4.9% year-on-year, slowing down from the previous quarter's growth of 12.2% year-on-year, or an annualized growth rate of 2.0%, and a growth of 0.5% compared to the previous quarter (after seasonal adjustments), impacted by the Delta variant of COVID-19 and supply chain disruptions due to raw material shortages.
New home sales in September 2021 grew by 14.0% from the previous month (after seasonal adjustments) and reached the highest level since August 2020, while August 2021 contracted by -1.4% from the previous month (after seasonal adjustments). New home sales increased in the Northeast, South, and West regions, but year-on-year, new home sales in September 2021 contracted at a slower rate of -17.6% compared to the same period last year.
The number of initial jobless claims for the week of October 17-23, 2021, was 281,000, continuing to decline for the fourth consecutive week and reaching the lowest level since the pandemic began in the U.S. in March 2020.

Japan

Retail sales in September 2021 contracted by -0.6% year-on-year, slowing down from the previous month's contraction of -3.2% year-on-year, as consumers remained cautious about spending due to concerns over the COVID-19 pandemic.
The unemployment rate in September 2021 was 2.8% of the total labor force, unchanged from July and August 2021.

Eurozone

The European Central Bank decided to maintain the policy interest rate at 0.0% per annum during its October 2021 meeting. The ECB stated that it would keep the policy interest rate low until the Eurozone's inflation rate returns to the target inflation rate of 2.0% in the medium term.

Hong Kong

The value of exports in September 2021 grew by 16.5% year-on-year, slowing down from the previous month's growth of 25.9% year-on-year, driven mainly by sales of electrical machinery, office equipment, automated processing equipment, gold and silver jewelry, and mineral production.
The value of imports in September 2021 grew by 23.5% year-on-year, slowing down from the previous month's growth of 28.1% year-on-year.
The trade balance in September 2021 recorded a deficit of -42.4 billion Hong Kong dollars, increasing from the previous month's deficit of -26.3 billion Hong Kong dollars.

Vietnam

The value of exports in October 2021 grew by 0.3% year-on-year, improving from the previous month's contraction of -0.5% year-on-year.
The value of imports in October 2021 grew by 8.1% year-on-year, decreasing from the previous month's growth of 10.2% year-on-year.
The trade balance in October 2021 recorded a surplus of 1.1 billion USD, increasing from the previous month's surplus of 0.4 billion USD.
Retail sales in October 2021 contracted by -19.5% year-on-year, improving from the previous month's contraction of -28.4% year-on-year.
Industrial production in October 2021 contracted by -1.6% year-on-year, improving from the previous month's contraction of -7.5% year-on-year, primarily due to electricity and gas production.
The inflation rate in October 2021 grew by 1.8% year-on-year, decreasing from the previous month's rate of 2.1% year-on-year.

Australia

The inflation rate in Q3 2021 grew by 3.0% year-on-year, decreasing from the previous quarter's growth of 3.8% year-on-year and slightly below market expectations of 3.1% year-on-year.

Singapore

The inflation rate in September 2021 grew by 2.5% year-on-year, increasing from the previous month's rate of 2.4% year-on-year, primarily due to food prices.
Industrial production in September 2021 contracted by -3.4% year-on-year, decreasing from the previous month's growth of 11.2% year-on-year, primarily due to overall industrial production.
The unemployment rate in Q3 2021 (preliminary) was 2.6% of the total labor force, decreasing from the previous quarter's rate of 2.7% of the total labor force.

Malaysia

The value of exports in September 2021 grew by 24.7% year-on-year, increasing from the previous month's growth of 18.4% year-on-year.
The value of imports in September 2021 grew by 26.5% year-on-year, increasing from the previous month's growth of 12.5% year-on-year.

South Korea

The GDP in Q3 2021 grew by 4.0% year-on-year, slowing down from the previous quarter's growth of 6.0% year-on-year, and representing a growth of 0.3% from the previous quarter (after seasonal adjustments), impacted by domestic consumption and investment contraction due to strict COVID-19 prevention measures and the effects of heatwaves, as well as rising raw material prices.
Industrial production in September 2021 contracted by -1.8% year-on-year, while the previous month showed a growth of 9.7% year-on-year, marking the first contraction since November 2020.
Retail sales in September 2021 grew by 3.7% year-on-year, slowing down from the previous month's growth of 3.8% year-on-year.
The consumer confidence index in October 2021 was at 106.8 points, increasing from the previous month's level of 103.8 points, the highest since June 2021, indicating improved public optimism about the economic situation.
The trade balance in September 2021 recorded a surplus of 26.1 billion Malaysian ringgit, increasing from the previous month's surplus of 21.4 billion Malaysian ringgit.

Taiwan

Industrial production in September 2021 grew by 12.24% year-on-year, slowing down from the previous month's growth of 13.43% year-on-year.
Retail sales in September 2021 grew by 1.26% year-on-year, accelerating from the previous month's contraction of -4.3% year-on-year, driven by increased sales of fuel, information and communication equipment, and electrical appliances.
The consumer confidence index in October 2021 was at 74.26 points, decreasing from the previous month's level of 74.39 points.

Money Market and Exchange Rate Indicators

The SET index slightly decreased from the previous week, in contrast to other regional stock markets that increased from the previous week, such as HSI (Hong Kong), CSI300 (Shanghai), and STI (Singapore). On October 28, 2021, the index closed at 1,624.31 points, with an average trading value between October 25-28, 2021, at 72,001.50 million baht per day. Foreign investors and domestic institutional investors were net sellers, while domestic retail investors and brokerage accounts were net buyers. During October 25-28, 2021, foreign investors sold securities net -3,818.22 million baht.

The overall yield on government bonds decreased by -1 to -14 bps during this week, with investors bidding for 11-year and 51-year government bonds, which attracted interest of 1.62 and 1.47 times the bidding amount, respectively. During October 25-28, 2021, foreign investor capital flowed into the bond market net 7,049.79 million baht, and from the beginning of the year until October 28, 2021, foreign investor capital flowed into the bond market net 75,255.55 million baht.

The Thai baht appreciated against the previous week, closing at 33.29 baht per US dollar on October 28, 2021, appreciating by 0.28% from the previous week, in line with the appreciation of the yen, ringgit, and won against the US dollar. Meanwhile, the euro, Singapore dollar, and yuan depreciated against the US dollar compared to the previous week. The baht appreciated more than other major currencies in the region, resulting in the Nominal Effective Exchange Rate (NEER) appreciating by 0.29% from the previous week.