CARI Captures Issue 620: Thailand’s GDP growth from Q1 2021 to Q2 2023, year-on-year (%)

Srettha Thavisin of Pheu Thai Party officially appointed as country’s 30th prime minister
(23 August 2023) On 23 August, 2023, 61-year-old property tycoon Srettha Thavisin of the Pheu Thai Party received a royal endorsement from King Maha Vajiralongkorn to become the country’s 30th prime minister. The new government will be formed after the appointment of his cabinet ministers, with Pheu Thai currently negotiating with its coalition partners. Among Srettva’s key policies include transferring US$286 into the digital wallets of people over age 16 across the country, to be spent in small shops within a 4-kilometer radius of the recipient. He also intends to hike the minimum wage to THB600 (US$17.07) per day, nearly double the current THB300 (US$8.53) to THB330 (US$9.39). Srettha forms a government amidst a slowing economy, having expanded 1.8% year-on-year in the second quarter of 2023. This is a slower pace than the 2.6% expansion in the first quarter. Exports of goods contracted 5.7% in the second quarter.

Property sector’s post-pandemic recovery delayed due to political uncertainty
(25 August 2023) The post-COVID-19 pandemic recovery of Thailand’s property sector has been delayed due to the country’s ongoing political uncertainty. More than three months after the country’s general elections on 14 May, 2023, a new cabinet has still not been identified. The real estate sector is one of the key drivers of the Thai economy, contributing about 10% of GDP. Many developers have delayed launches due to the current political vacumn. It was projected that almost 45,000 new condominium units would be launched in the Bangkok Metropolitan area. However, after the first half of 2023, only 12,000 units have been launched. Rising interest rates have also affected the sector, as it is causing consumers to delay purchases.

Central banks of Malaysia, Indonesia, and Thailand sign MOUs to strengthen cooperation and promote usage of local currencies
(25 August 2023) The central banks of Malaysia, Indonesia, and Thailand, Bank Negara Malaysia (BNM), Bank Indonesia (BI), and the Bank of Thailand (BOT) respectively, have signed three bilateral memoranda of understanding (MoUs) on a framework for cooperation to promote the usage of local currencies in bilateral transactions between the countries. According to BNM, the scope of the framework has been expanded to include more eligible cross-border transactions beyond trade and direct investments. The new framework also intends to synergise with cross-border payment initiatives to create more accessible and efficient local currency settlements to enhance regional financial market stability and strengthen cross-border economic activities.

Rate of inflation slows down to 2% year-on-year in July 2023, lowest so far in 2023
(25 August 2023) According to Malaysia’s National Statistics Department, Malaysia’s rate of inflation slowed down to 2% year-on-year in July 2023, its lowest so far this year. This was attributed to a slower increase in the costs of restaurants and hotels and food and non-alcoholic beverages. This was lower than the 2.4% growth recorded in June. Monthly headline inflation eased to 0.1% against 0.2% recorded in June, while core inflation increased 2.8% as compared to 3.1% the preceding month. Food and non-alcoholic beverages recorded a moderate increase of 4.4%, while the restaurants and hotels category registered a 5% increase.

Grab expected to turn its first quarterly profit earlier than projected
(24 August 2023) Singapore-based Grab expects to turn its first quarterly profit sooner than projected. The company now expects to break even on a group level in the third quarter of 2023 on an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) basis, ahead of the previous target of the final quarter. Grab also expects to narrow their adjusted EBITDA loss for 2023 to US$30 million to US$40 million, compared with an earlier forecast of a US$195 million to US$235 million loss. On 23 August, 2023, the company announced a US$148 million loss for the second quarter, compared with a US$572 million loss for the same period in 2022. This follows a series of cost-cutting measures as well as increased demand for the company’s ride-hailing and food delivery services.

Central bank expects GDP growth in 2023 to miss government target
(21 August 2023) The Philippines’ central bank, the Bangko Sentral ng Pilipinas (BSP), expects GDP growth in 2023 to miss the government’s target due to moderating economic activity and the impact of recent rate hikes. The BSP stated that growth this year could settle below the official target of 6% to 7% for 2023 and 6.5% to 8.0% for 2024 and 2025. The BSP stated that the economy is expected to ‘operate close to potential, on average, in 2023’, but will moderate over the policy horizon due to waning pent-up demand and the effects of prior monetary policy tightening. A policy horizon refers to the time required to bring inflation within the target of a central bank. The BSP has raised its key rate by 4.25 basis points since May 2022.

Indonesian government to temporarily relax solar power rules to spur development of solar energy
(21 August 2023) The Indonesian government will temporarily relax solar power rules to help spur the development of solar energy within the country and to help it reach its target of net zero emissions by 2050. Authorities will remove requirements that mandate solar projects use a majority of domestically produced materials until 2025, when Indonesia’s first solar panel factory is expected to begin production. Lifting local content requirements for solar was one of more than a dozen policy reforms laid out in the draft investment plan for the US$20 billion Just Energy Transition Partnership that Indonesia previously negotiated with the United States and other wealthy countries. Authorities intend to increase its solar power capacity fivefold in the next five years, and will require nearly US$2.4 billion to do so.

RCEP Monitor

Overseas investors dump US$10.7 billion worth of onshore Chinese stocks in 13 consecutive trading sessions
(24 August 2023) Global investors have dumped an estimated US$10.7 billion worth of onshore Chinese stocks in 13 consecutive trading sessions in the month to date in August 2023. The streak of selling is the longest since data compilation began in December 2016, and has triggered a US$900 billion wipeout in market value. The bout of selling is attributed to a lack of confidence among investors in regard to China’s growth outlook and the feeble response from policymakers. The Chinese economy has been particularly impacted by the ongoing slump in the property sector, with the latest bouts of default threatening to trigger a contagion effect on the sector.

Australia’s second-largest pension fund to open first overseas office in London by mid-2024
(25 August 2023) Australia’s second-largest pension fund, Australian Retirement Trust (ART), will open its first overseas office by mid-2024. This makes ART the latest Australian retirement manager to look overseas as the country’s pension sector outgrows its home market. ART manages some US$154 billion in assets and seeks to move closer to its private equity and debt managers to allow them to clinch more co-investment deals, where private managers offer investors direct stakes. The new office will ‘almost certainly’ be based in London, and a decision on a second office will be made 12 to 24 months after the first opens. Australia’s US$2.4 trillion professional pension sector is increasingly seeking overseas markets to deploy the funds generated by a system that sets aside 11% of an Australian worker’s pay-packet for retirement.

Retail sales drop by 1% quarter-on-quarter in second quarter of 2023
(23 August 2023) Sales adjusted for inflation and seasonal effects fell 1% quarter-on-quarter in the second quarter of 2023, more than twice the 0.4% drop estimated by economists. This is the third straight quarterly contraction. This unexpectedly large decline suggests GDP may be weaker than anticipated. New Zealand households are cutting back on spending due to soaring prices and interest rate hikes. More pressure on household’s finances will continue to build as many fixed-term mortgages expire and roll onto higher rates. This poses downsides to the possibility of the economy emerging from the recession it entered into in the fourth quarter of 2022.

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