CARI Captures Issue 594: Thailand’s GDP growth, 2011-2023 (%)

Thailand’s economy projected to expand by 4% in 2023 due to rebounding tourism
(22 February 2023) According to Nomura Holdings Inc, Thailand’s economy is expected to expand by 4% in 2023, even after a shock 1.5% quarter-by-quarter contraction in the fourth quarter of 2022. This is attributed to China’s recent reopening, which has triggered a rush of Chinese tourists to Thailand. This will help raise domestic consumption, countering headwinds to merchandise exports from a slowing global economy. An economist from DBS sees significant upside from returning Chinese tourists over the next two years, driven by revenge travelling, improvements in flight capacity, and Thai authorities’ efforts to spur tourism. Nomura Holdings expects 30 million foreign tourists coming to Thailand in 2023

Core inflation rises to 5.5% year-on-year in January 2023, highest since November 2008
(23 February 2023) Singapore’s core inflation rose to 5.5% year-on-year in January 2023, its highest since November 2008. This was a rise from the 5.1% recorded in December 2022. Core inflation had remained stable from October to December 2022. The spike in inflation in January was driven by a rise in the Goods and Services Tax (GST) rate as well as higher price rises for services, food and retail and other goods. The core consumer price index rose by 0.8% on a month-on-month basis. Core inflation excludes accommodation and private transport costs. Overall inflation, on the other hand, was recorded at 6.6% year-on-year in January, higher than the 6.5% recorded in December 2022. Core inflation is expected to remain above 5% year-on-year in the first quarter of 2023, and remain elevated for the first half of this year.

Singapore launches new digital payments connection with India to allow real-time cross-border transfer of money
(21 February 2023) On 21 February, 2023, Singapore launched a new digital payments connection with India to allow the real-time cross-border transfer of money virtually. The initiative saw Singapore’s PayNow digital payments infrastructure linked with India’s Unified Payments Interface. This is expected to reduce the costs and inefficiencies of remittances between both countries. Singapore has a large presence of Indian workers who use remittance agents to transfer money back home, but these transactions typically take a few days. Singapore’s connection with India follows similar initiatives previously made with Thailand and Malaysia, and is part of Singapore’s goal of becoming a regional nexus for transactions worth billions of dollars.

Tax breaks being offered to banks to encourage them to relocate to new capital
(22 February 2023) Indonesia is unveiling a number of tax breaks to encourage companies and people to move to its new capital Nusantara on Borneo island. Banks and insurers who set up shop in Nusantara will pay no income tax for up to 25 years if they invest before 2035, while those investing before 2045 can get up to 20 years of tax break. The tax breaks being offered by the government will only be offered up to 2045, when Nusantara is set to be completed. Indonesia is currently seeking investors to help build Indonesia’s new capital city, with the state budget only covering some 20% of the total cost of the project. The new capital is expected to cost US$40 billion.

Economic and trade cooperation between the Philippines and China expected to reach new heights after RCEP ratification
(23 February 2023) Economic and trade cooperation between the Philippines and China are expected to reach new heights after the Philippines recently ratified the Regional Comprehensive Economic Partnership (RCEP). The Philippines ratified RCEP on 21 February, 2023, being the last signatory member to ratify the trade pact, which currently involves 15 economies in the Asia-Pacific region. The ratification of RCEP is expected to integrate the Philippines’ economy further within regional industrial and supply chains, adding further growth impetus to the country. Specific sectors within the Philippines expected to benefit from RCEP include agricultural product processing, electrical machinery and the digital economy. China is the Philippines’ largest trade partner and second-largest export market. Their bilateral trade surged 10.6% on a yearly basis to US$84.91 billion in 2022.

High-end home prices could drop by 10% or more in 2023 before rebounding in 2024
(23 February 2023) High-end home prices may fall by 10% or more in 2023 before rebounding in 2024. This is attributed to higher mortgage costs impacting property speculators, forcing them to sell their holdings and push more supply within the market. Authorities have already signalled their concerns about a mismatch in the supply of luxury and affordable housing. Following an official crackdown on corruption in the property and bond markets starting in 2022, there has been a slowdown in lending. According to Viet Nam’s central bank, credit growth in 2022 was 24% in the real estate sector compared with 14% in the broader economy.

Viet Nam targets US$4 billion in fruit and vegetable exports in 2023, a 20% increase year-on-year
(23 February 2023) Viet Nam targets US$4 billion worth of fruit and vegetable exports in 2023, a 20% increase year-on-year. The export of dragon fruit, bananas and durian alone is expected to contribute US$2 billion to the country’s export turnover in 2023. Fruit and vegetable exports registered positive numbers in early 2023, reaching US$300 million in January, an increase of 3% year-on-year. This has been attributed to China’s recent reopening, its rising imports of Vietnamese fruits and vegetables, and the efforts of Vietnamese exporters to maintain orders with partners in the United States, the European Union and Japan. From 01 January to 13 February, 220,000 tonnes of fruits were exported to China through border gates in the northern province of Lng Sn, a 40% increase year-on-year.

RCEP Monitor

Core consumer inflation hits 41 year high in January 2023 as companies pass higher costs to consumers
(24 February 2023) Core consumer inflation hit a 41-year high in January 2023, as companies passed on higher costs to households. The nationwide core consumer price index (CPI), which excludes volatile fresh food but includes energy costs, was recorded at 4.2% year-on-year in January, a rise from the 4.0% annual gain seen in December 2022. This is the fastest rise in core consumer inflation since September 1981. Inflation has now exceeded the Bank of Japan’s 2% target for nine straight months. This has placed more pressure on the Bank of Japan to phase out its yield control policy.

South Korea’s central bank freezes rates at 3.5%, ending year-long run of hikes
(23 February 2023) On 23 February, 2023, the Bank of Korea froze benchmark interest rates at 3.5%, ending a year-long run of rate hikes. The Bank of Korea’s decision came after the economy contracted in the last quarter of 2022, the first time since the second quarter of 2020. The central bank has hiked rates eight times since January 2022 – with one pause in February – as it seeks to curb rising energy and food prices. While inflation is expected to be above the target level in 2023, the current slowdown in global economic growth and inflation has encouraged the Bank of Korea to reassess its current course of monetary tightening. The central bank has also revised its economic growth projection down to 1.6% from 1.7% in 2023, compared with a 2.6% expansion in 2022.

Average rents expected to increase by up to 7.5% in 2023, most since 2008
(22 February 2023) Average rents are expected to increase by up to 7.5% in 2023, on top of the 4% increase recorded in 2022. This is expected to impact middle-and-low income household budgets amid a general rise in the cost of living. In response to the rise in rents, nominal household consumption could fall by as much as 1% in 2023. The rental market is expected to come under further strain once international students and migrants return to Australia. The rise in rents is attributed to the Australian central bank’s current course of monetary tightening, which has forced landlords to pass on higher borrowing costs to renters.

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