The “Asean Briefs” newsletter publishes a weekly summary of economic reports from Southeast Asia. We run a weekly Thai information panel.
Sharp fall in inflation in May
Inflation reached its highest rate in 13 years in May (+ 7.1% y / y, compared with only + 1.2% in 2021), due to a sharp rise in energy prices (+ 37.2%) and food prices (+6, 2%), especially meat (+ 19.5%). This significant deterioration can be explained mainly by external supply constraints (especially the consequences of the conflict in Ukraine and the export restrictions of some countries) in the context of a recovery in global demand. At the domestic level, the devaluation of baht and the end of subsidies for cooking gas prices also contributed to the recovery in inflation. This development surprised the Thai central bank, which had to suddenly revise its inflation forecast for 2022 upwards (+ 6.2% compared to the previous forecast of + 4.9% and + 2.5%). However, the Central Bank of Thailand (BoT) has decided to keep its key rate unchanged at + 0.5%, while not wanting to hinder the continuing economic recovery. As such, BoT slightly revised its growth forecast for 2022 upwards (+ 3.3% after + 3.2% at the end of March), in line with the stronger expected recovery in tourist arrivals.
Export promotion for SMEs
The Thai EXIM Bank has decided to set aside THB 5 billion (USD 150 million) to provide loans at reduced rates for small and medium-sized enterprises. This loan is aimed at supporting exports from the Kingdom and includes a cooperation program to help entrepreneurs in the value chain. It offers an annual interest rate of 4.5% for the first year at a maximum of THB 5 million (USD 150,000) per borrower. This support program supports the exports of Thai SMEs, which have suffered particularly from the effects of the health crisis and are now facing a massive rise in inflation, which is limiting their competitiveness. At present, Thai exporting SMEs account for less than 1% of the country’s approximately 3.1 million SMEs, which employ more than 12 million people.
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