Consumer spending is bolstering Thailand's economy, battered by the 1997 Asian financial crisis. Individual purchasing power is rising, boosted by easy credit. But long-term financial health will depend on other key factors such as exports.
Thai Prime Minister Thaksin Shinawatra said in a recent interview the economy is in good shape and gross domestic product should meet revised growth figures of 3.5 percent this year. "I think it will be easily accomplished," he said. "Not very tough to be achieved. I think it will be easily achieved."
The Thai economy is riding a consumer boom propelled by easy credit. Mr. Thaksin said improving corporate profits and strong government spending encourages the public to go out and spend. "I think the numbers [are] promising," he continued. "Corporate income is increasing when compared to last year and the GDP growth is increasing, and the consumption, consumer confidence is increasing. The user capacity has seen growth as well."
Domestic consumption has been lifted by a sharp increase in credit cards under a central bank policy aimed specifically at domestic spending.
In the first quarter of this year, the numbers of new cardholders surged by 42 percent and credit card spending was up 30 percent to $1.7 billion.
Pittaya Jearavisidkul, the president of the Thai Retailers Association, said he is happy about retail sales, which are expected to show seven-percent growth this year. He said, "I think this year the economy as a whole has been predicted to be recovering. The GDP growth is revised to be increased to 3.5 percent. It's supposed to be better than last year. In terms of retail sales, it should be also better than last year."
Mr. Pittaya said the easier credit policy has enabled more people to gain access to funds for spending. He said food sales are strong, and electric appliance sales are also doing quite well.
But the economic mood here is still far from the free-spending days of the early 1990s. Economic growth then averaged eight to 10 percent a year and exports were strong. But the banking system was fast overheating from partial financial liberalization.
An excess of foreign funds and investment into non-productive areas such as real estate helped created the Thai bubble that triggered Asia's financial crisis in 1997.
Arporn Chewakrengkai, an economist with the Government Pension Fund and economic adviser to former prime minister, Chuan Leekpai, said while a recovery is underway, less certain is whether it will last. "That is a concern for me," he said, "whether it will be sustained or not. To me, okay, I agree the current recovery comes from the consumption side - but without a contribution from exports."
She also predicts 3.5 percent of economic growth. But a key driver to keep the largely agricultural-based economy rolling, exports, remains weak. In the first four months of this year, Thai exports fell 4.5 percent.
Thai exports have been hurt by uncertainties over the weak U.S. economy and depressed export prices.
Another fear is that government spending will add to the hefty public debt of more than $70 billion, which is left over from the 1997 crisis.
Debt is forecast to rise by $7 billion to almost $80 billion or just over 50 percent of Thailand's total output by year's end.
The government is banking on a recovery in the United States and Japan by late this year or early 2003 to revive Thai exports and keep economic growth on track.