Investment continues to contract, NESDC reports
Bank of Thailand points to declining pick-up truck sales as one of the factors behind private investment drop
Investment, a key driver of Thailand's economy, contracted in Q2 for the third consecutive quarter, decreasing by 6.2%. The National Economic and Social Development Council (NESDC) reported a 6.8% decline in private investment, mainly due to an 8.1% drop in machinery and equipment investment, a 22.5% decrease in vehicle investment, and a slowdown in capital goods imports.
This investment decline aligns with the reduction in new business registrations during the first seven months of 2024, totalling 54,220, a 69.99% decrease from the same period last year.
However, in the first six months of 2024, 1,412 projects were granted investment promotion, with a total investment of 458.358 billion baht and registered capital of 25.997 billion baht. This reflects an increase compared to the same period in 2023, which saw 891 projects with 364.442 billion baht in investment and 73.250 billion baht in registered capital.
In the past year, under Prime Minister Srettha Thavisin's government, numerous discussions with foreign companies have been held to attract investment to Thailand. The Srettha government expected that investment activities, particularly from roadshows and government support measures in the four main industries, would amount to approximately 558 billion baht.
Bank of Thailand Governor Sethaput Suthiwartnarueput stated that the BOT is closely monitoring investments due to the significant contraction. One factor contributing to the decline in private investment is the sharp drop in pickup truck sales, as purchasing pickup trucks is considered an investment, thereby reducing overall private investment figures.
“Used car prices have dropped significantly in recent months, affecting loans and increasing non-performing loans, which in turn reduces the demand for pickup trucks. The decline in private investment figures is not primarily due to a loss of investment but partly due to the drop in pickup truck sales. We are examining whether this issue is temporary,” Sethaput added.
As to whether the BOT is being overly optimistic about the economy, Sethaput clarified that the BOT has never claimed the economy is strong. Instead, the BOT noted that economic growth is returning to its potential level, which is relatively low at just below 3%. The BOT is increasingly concerned about the vulnerability of purchasing power, which is now spreading beyond the lower-income groups.
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), stated that the decline in private investment is partly due to political uncertainty, which has eroded confidence since the Constitutional Court accepted the case against Srettha. This uncertainty has caused some investors and industries to adopt a wait-and-see approach.
“Investors are now waiting to see the policy confidence following discussions with the new Prime Minister. It is expected that within a month, a complete Cabinet will be formed, and if no further political incidents arise, investment should improve," Kriengkrai said.
Amonthep Chawla, assistant managing director of the Research Office at CIMB Thai Bank, revealed that the sharp decline in private investment is mainly due to a slowdown in machinery and construction-related imports. This is a concerning sign as it reflects a potential reduction in future production capacity, which could further slow the economy or delay its recovery.
