Thailand
Thailand: Happy New Spending
Domestic consumer spending has gradually recovered since the government started easing its lockdown and curfew measures in September.
The country’s reopening for fully vaccinated foreign tourists on Nov 1 helped build up sentiment, as indicated by the consumer confidence index surveyed by the University of the Thai Chamber of Commerce (UTCC), showing a third straight monthly increase in November, hitting a seven-month high.
Rising public expectations based on the resumption of economic activities, the government’s diesel subsidy programme (capping prices at less than 30 baht per litre), and economic stimulus measures, which have pumped more than 100 billion baht into the economy, have helped to boost consumer sentiment about spending.
More importantly, Thailand’s Covid-19 situation has started to moderate, with the number of new daily infections and deaths gradually dropping, while the vaccine distribution rollout has progressed better than expected. Grave concerns about a possible recurrence of outbreaks after the country’s reopening have proven to be unfounded.
However, with the emergence of the new Omicron variant in late November and its spread to more than 60 countries including Thailand, Thais remain concerned about its negative impact on economic recovery, purchasing power, tourism, exports, future employment, and in particular, their spending plans during the New Year festive season.
CHEERFUL MOMENTUM
Thanavath Phonvichai, the UTCC president, said despite the fear of Omicron, overall sentiment is expected to improve further in December.
“There are good signals during the end of this year, as indicated by more active spending and recovering sales at shopping malls and restaurants, as well as increased travel,” he said.
“The government should continue to introduce more economic stimulus measures, including the fourth phase of the ‘Khon La Khrueng’ co-payment subsidy scheme, the ‘We Travel Together’ tourism subsidy programme, and shopping stimulus packages similar to the previous ‘Shop Dee Mee Khuen’ (shop and payback) scheme, offering a tax deduction for individuals of up to 30,000 baht when purchasing goods or services. Such stimulus measures will entice people, particularly those with high purchasing power and taxpayers, to pay more during the festive season.”
According to Mr Thanavath, people now seem to be less concerned about the spread of the Omicron variant. Most people are confident they know how to protect themselves from infection risks, while the domestic infection rate for the new strain remains relatively low, he said.
“We expect consumer consumption will maintain its positive momentum until next year,” said Mr Thanavath. “More importantly, prices of many key agricultural products have increased, improving farmers’ income.”
COURAGE TO PAY
The Federation of Thai Industries (FTI) believes people will spend more money during celebrations this month and the domestic spending mood will continue to recover next year.
Manufacturers are receiving more orders from abroad, but have decided not to rapidly increase their production because of various concerns, including the possible impact of Omicron, said Supant Mongkolsuthree, chairman of the FTI.
He attributed higher consumption levels to the reopening of Thailand since Nov 1, the return of fully vaccinated foreign tourists and a global economic recovery.
“This is giving people more confidence. They have more courage to go shopping,” said Mr Supant.
“Purchase of luxury goods is also on the rise.”
State stimulus packages, including the Khon La Khrueng co-payment subsidy and the We Travel Together subsidy programme, also helped stimulate consumption, he said.
The federation wants the government to continue these projects because it sees them as necessary to restore and strengthen the Thai economy.
According to the FTI, sales of some New Year gifts, notably calendars and cards, remain sluggish this year because of the impact of Covid-19.
Kriengkrai Thiennukul, vice-chairman of the FTI, said earlier purchase orders for calendars and diaries are expected to fall by 10-15% from the last pre-pandemic year of 2019.
Large companies and state enterprises have continued to place orders, but in reduced quantities, while small and medium-sized enterprises (SMEs) rarely bought these items.
New Year cards are “near extinction” because people have switched their method of sending best wishes to one another to smartphones, via Line chat and Facebook, said Mr Kriengkrai.
On the trade front, manufacturers have received more purchase orders, especially in the food and fashion item segments, because of higher demand in the lead-up to the Christmas and New Year festivals, he said.
The FTI said it expects year-end sales to help increase export values by 15-16% to US$266-268 million this year.
However, exporters are still worried about negative factors that could increase their costs, ranging from increased energy and raw material prices to higher freight rates and foreign exchange fluctuations.
These are causing manufacturers to be cautious and only gradually increase their production, said Mr Supant.
E-COMMERCE BOOM
Suchaya Paleewong, senior marketing manager of Shopee Thailand, said Shopee sees lots of enthusiasm and excitement from consumers during the year-end shopping season as they hunt for the best deals from sellers and brands.
“We have seen strong demand and engagement from all our users, thanks to a line-up of entertainment, games and big giveaway prizes,” said Ms Suchaya.
“We’re grateful for all the support from our sellers, brands and shoppers, resulting in a very successful 12.12 Birthday Sale.”
Shopee saw regional visits surge by six times on Dec 12, compared with an average day.
In Thailand, Shopee reported users claimed 15 times more ShopeePay vouchers on 12.12 compared with an average day, she said.
E-commerce player JD Central said consumer purchasing power has increased compared with last year.
During the year-end period, spending per buyer surged 24% from last year, the company said in a statement.
JD Central said December is typically the highest spending month, with 53% of a year’s total sales, followed by November at 15%.
In December more purchases are made online, especially during the Christmas and New Year’s period when consumers are keen to buy gifts not only for others, but also themselves as a year-end reward, the company said.
Somchai Sittichaisrichart, managing director of SET-listed SiS Distribution Thailand, a tech product distributor, said the company has seen a slight drop in sales since the start of this month, but demand is expected to return to pre-pandemic levels next year.
In the final quarter, more IT products are expected to be available due to greater allocation of supply from the US.
Over the past few years, IT items were purchased for remote work and online learning. The current supply shortage is expected to be eased as more products come on the market, he said.
Mr Somchai remains concerned about the sluggish economy and the closure of SMEs, which could take a toll on the demand for IT products.
He said the government should reintroduce the Shop Dee Mee Khuen programme because it could stimulate demand for IT products more actively.
The programme, which was rolled out last year, offers people income tax deductions when spending up to 30,000 baht on products and services.
Mr Somchai said overall IT spending is likely to see double-digit growth this year.
MISSED OPPORTUNITIES
Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association, said hotel bookings during the New Year holidays are gradually increasing, with average occupancy inching towards 60-70%.
The bookings are mainly driven by Thai tourists who want an excursion after enduring a lockdown and work stress over the past year, said Mrs Marisa.
She said domestic guests accounted for 68% of total bookings in November, and the number is expected to rise during the year-end holiday as most of them use the government’s hotel subsidy scheme for domestic trips during that period.
Mrs Marisa said hotels will have unequal incomes. For instance, hotels in Phuket, which received half of the inbound arrivals to Thailand, in addition to Bangkok’s riverside hotels and hotels with rooftop bars, are likely to be far busier than accommodation in other provinces.
She said hotel operators have lost more than 70% of their revenue from banquets and events, particularly weddings and year-end staff parties, as the former are worried about mass gatherings and decided to downsize with limited guests, while the latter switched to restaurants as convention halls in hotels are not allowed to serve alcoholic drinks.
“Thai tourists still cling to the subsidy programme from the government, which was a very effective booster over the past few months,” said Mrs Marisa.
“We would have done better in the final quarter if regular guests during the high season, such as weddings and staff parties, had returned to normal.”
She said the overall performance of hotels during the upcoming holiday might be promising, and there are a number of tourists who want to make last-minute bookings but are not confident about the ongoing virus situation.
Tassapon Bijleveld, executive chairman of Asia Aviation, the largest shareholder of the airline Thai AirAsia, said the average load factor has improved from the third quarter, but still fell short of expectations as most Thais have accumulated household debts over the past two years during the pandemic-induced economic crisis.
Lower purchasing power forced local tourists to choose nearby destinations for the New Year holiday instead of taking flights that require a higher budget and a screening process, he said.
TRAFFIC IMPROVING
Nattakit Tangpoonsinthana, executive vice-president for marketing at retail and property developer Central Pattana Plc, said he has seen improving customer traffic at all of the group’s shopping malls, both in Bangkok and provincial areas, since the relaxation of lockdown and curfew measures.
Customer traffic at several shopping complexes in provincial areas is back to normal, or almost 100% from the pre-crisis period, while the complexes in Bangkok are back to about 80%.
According to Mr Nattakit, the company continues to rely on local customers and is investing in promotional activities to lure shoppers to visit its complexes during the New Year festival.
Source: https://www.bangkokpost.com/business/2234715/happy-new-spending