Bank of Thailand marks Phuket boat disaster economic impact as inflation pressure rises


PHUKET: The Bank of Thailand has recognised the impact of the Phoenix tour boat disaster in Phuket has had on the economy, coupled with a jump in the inflation rate during the month July.

The number of foreign tourist arrivals registered a moderated growth of 2.8% compared to the same period last year, the Bank of Thailand noted in its report for July, issued on Friday (Aug 31). (See here.)

“This was mainly from the decline in the number of Chinese tourists due to the recent Phuket tour boat incident,” the report said.

“Moreover, the number of Russian tourists declined, partly due to postponement of travel during the 2018 FIFA World Cup period and depreciation of the Russian ruble,” it added.

However, the report also noted that the number of Hong Kong, Taiwanese, and Malaysian tourists continued to expand during the month.

“After seasonal adjustment, the number of foreign tourists decreased by 8.0% from the previous month, mainly from the decline in the number of Chinese tourists,” the report summarised.

The report also highlighted that headline inflation – the raw inflation figure reported through the Consumer Price Index (CPI) – accelerated to 1.46% from 1.38% in the previous month, “due mainly to an increase in retail petroleum prices”.

Core inflation, the change in costs of goods and services but not including the food and energy sectors, declined “marginally” from the previous month.

The rising rate of inflation is fuelling pressure for an interest rate hike, Bloomberg News reported yesterday.

“Rising food and energy costs boosted inflation to 1.6% in August, the highest in almost four years, adding to the case for the Bank of Thailand to deliver its first rate hike since 2011,” said the report, carried by the Bangkok Post.

“The policy rate of 1.5% is now below inflation, making the economy only the second one in Southeast Asia, alongside the Philippines, to have a negative real interest rate,” it added.

However, that report also noted that recent comments by BoT Governor Veerathai Santiprabhob have lowered the probability of an imminent rate hike. “Mr Veerathai said in an interview on Aug 29 that the central bank doesn’t face immediate pressure to tighten monetary policy like other emerging-market peers,” the report said.

Meanwhile, the BoT also reported that public spending, excluding transfers, expanded in both capital and current spending. The expansion in current spending was on the back of increased disbursement of civil servants’compensation and expenditures on goods and services.

In addition, capital spending expanded from disbursement for construction of the Royal Irrigation Department, and military hardware procurement noted a special mention.

Private investment indicators, however, slowed compared with the same period last year.

“Investment in machinery and equipment expanded from domestic machinery sales and number of newly registered motor vehicles for investment, which continued to increase in most categories,” the BoT report said, accentuating the positive.

“Moreover, investment in construction expanded from the same period last year mainly from the growth in construction material sales,” it added.

However, in finality, the BoT noted, “After seasonal adjustment, private investment indicators decreased from last month.”

Courtesy: Published at The Phuket News on September 5, 2018

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