Contractions in auto, property sectors a blow to economic expansion

Contractions in the automotive and property sectors have severely impacted the Thai economy in the first half of the year and prompted several institutes to adjust downwards their estimates on economic expansion this year, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) announced.

In its monthly meeting to discuss the economic situation on Wednesday, the JSCCIB cut its estimation of Thailand’s gross domestic product (GDP) expansion in 2024 by 0.3-0.4% to 2.2-2.7% year on year.

The meeting also acknowledged the World Bank’s updated GDP prediction of Thailand in 2024 of 2.4% expansion, down from the previous estimate of 2.8%.

Payong Srivanich, chairman of the Thai Bankers Association, who also chairs the JSCCIB, announced that the committee predicted automotive sales in the first five months of 2024 would contract 24% year on year, a decrease of about 81,000 vehicles. The segment that will see the biggest drop in sales is commercial cars, estimated to go down 39% year on year, or some 67,000 vehicles, he said.

Payong said there were several reasons behind sluggish auto sales, including rising household debts, stricter loan criteria, and delays in the government budget disbursement that have resulted in a large contraction in vehicle demand, especially in trucks and pickups used in the construction of government projects.

Payong predicted that the situation in the auto industry could prompt the Federation of Thai Industries (FTI) to reduce its auto manufacturing target this year from 1.9 million to 1.85 million vehicles when it meets at the end of this month. The reduction will likely come from the domestic market with 0.7 million vehicles, while production for export will remain the same at 1.15 million vehicles, he said.

The JSCCIB also acknowledged that total property transfers in the first four months of this year dropped by 11.8% for houses and 7.4% for condominiums.

The meeting agreed that the main factors behind this are rising interest rates and banks using stricter loan criteria under the Bank of Thailand’s responsible lending measures, which aim to curb household debt.

The JSCCIB predicted that the transfer of property in the Bangkok metropolitan area this year, which is accountable for 60-70% of the whole country, would drop by 9.3% year on year to a total value of 576 billion baht. Of this number, 365 billion baht would come from houses, a drop of 8.7% year on year, and 211 billion baht from condominiums, down by 10.3% year on year.

The meeting also slightly adjusted downwards its prediction on export expansion this year from 0.8-1.5% to 0.5-1.5%, in line with the stagnation of global trading, geopolitical tensions and the possibility that freight charges could be raised by as much as 95%.

After considering the current economic situation in the past six months, the JSCCIB agreed to adjust its estimation for GDP expansion this year to 2.2-2.7%, with 0.5-1% inflation.

“The JSCCIB will closely monitor factors that could affect the global and domestic economy for the rest of the year and we will adjust our predictions accordingly,” said Payong.