The low oil price environment has an overall positive impact on the Thai economy. Industries such as wholesale/retail, food and beverage, and electronics should benefit from increased consumption, while the logistics sector will gain from lower fuel prices. Thailand as a net oil-importing nation should benefit from cheap oil. It should help improve private consumption as more money is left in consumers' pocket from lower fuel bill. Firms should also enjoy cost saving from low oil prices, especially highly oil-dependent sectors like airlines and logistics. Cheaper retail fuel prices will most benefit those living and working in non-farming areas especially the metropolis like Bangkok. Cost saving is relatively high for this consumer group.
City dwellers will enjoy a net-positive impact from falling oil prices. Their higher spending power from lower gasoline expenditure should translate into an increase in consumption. As this non-farming economy accounts for roughly 60% of the population, one would think that this tips the scale towards a clear plus for the entire economy.
Under the inflation-targeting and managed-float framework, market forces are allowed to determine the value of the Baht which reflect demand and supply for the Baht in the foreign exchange markets. The Bank of Thailand extensively and carefully sought the most suitable monetary framework for Thailand, the one that would best focus on the expectations of the market and would strengthen the credibility of the monetary policy. Terms of trade and international reserves have a significant impact on the THB/USD exchange rate over the period in the study. Terms of trade has a negative relationship with the THB/USD exchange rate at a 95% confidence level. By contrast, international reserves have a positive relationship with the THB/USD exchange rate. The coefficient of terms of trade is the highest, which means that terms of trade has the strongest relationship with the THB/USD exchange rate, and is followed by international reserves.
Target Property expects the Thai baht to remain resilient against the US dollar despite ongoing regional currency weakness. This owes to our expectations for the Thai economy to recover over the coming quarters, with real interest rates set to remain positive and the current account balance registering a surplus. The ongoing economic recovery in Thailand on the back of renewed political and social stability, as well as weak global oil prices that will drive down import costs and keep price pressures relatively muted will lend support to the currency. We forecast for Thai Baht to climb towards 37.80 by the end of 2017.
Thailand’s domestic savings were high — about 34% of GDP (35.4% in 2015 according to IMF) — well above world figures of 24.4%). We expected the Thai economic recovery in 2017 would be more broad-based, instead of relying largely on government spending, like in 2016 an increase in the minimum wage, improvements in farm income, the end of instalment repayment of car buyers under the first car scheme, a new personal income tax structure and improvements in household. In December 2016 Thailand’s consumer prices rose slightly by 0.13% on a month-on-month basis, contrasting the 0.06% drop recorded in November. The prices of energy and vehicles and vehicle operations rose the most and offset price decreases in other categories, including the important food and beverage category. Core consumer prices, which exclude energy and fresh food, increased 0.01% in December compared to the previous month, inching down from November’s 0.03% rise. Inflation came in at 1.1% in December, above the 0.6% rise registered in November and also marginally above market expectations of a 1.0% increase. The reading is thus within the Central Bank’s target band of 1.0%-4.0% for the first time since November 2014. Core inflation remained constant at 0.7% in December. The Bank of Thailand foresees inflation of 1.5% in 2017. FocusEconomics Consensus Forecast panelists expect inflation of 1.7% on average in 2017, which is down 0.1 percentage points from last month’s forecast. For 2018, panelists predict average inflation of 2.0%. The Bank of Thailand recently spoke of Thailand’s high level of foreign exchange reserves, which amount to some 3.2 times of outstanding short-term foreign debt, as well as strong current account position. Medium-term inflation expectation remains close to the target at 2.5 percent. Thai government spending continues to be a driving force of the economy and he growth in 2017 is expected to be higher thanks to additional government projects in addition to various large-scale ongoing infrastructure projects.
Thailand’s debt levels are relatively low, there's positive credit impulse and strong domestic consumption. Thailand's benchmark SET index was Asia's second-best performer last year, up 20 percent. Thai exports are expected to benefit from increased infrastructure investment and the government’s ongoing commitment to free market principles. This should allow Thailand to continue leveraging its large, low-cost labour force to manufacture and export a wide variety of goods to a diverse range of partners. China, the US, and Japan account for about 31% of Thai exports, according to National Economic and Social Development Board data.
Investment in infrastructure such as railway double-tracking, motorways, and 10 new mass-transit routes will make Thailand a regional transport hub after the Asean Economic Community goes into effect at the end of this month. This will boost demand to buy homes in Thailand, both in Bangkok and in the provinces, as foreign companies invest in Thailand as a gateway to other Asean countries. 220 billion baht is set for infrastructure development will be pumped into the economy in 2017.
Plus Property research recently showed that 3 in 4 consumers still do not own any residential property, with most showing interest in condominium projects in the vicinity of BTS Skytrain stations because of the extra convenience in commuting. Most consumers would choose to live around 9 to 10 kilometres or 30 minutes from their office, close to a BTS station with an apartment size between 35 and 40 square metres. Luxury property projects in Bangkok have experienced an average price increase of 30% in the past 5 years with majority of these projects located in the inner Sukhumvit and Silom-Sathorn areas. The majority of these projects are in the central business district (CBD), including 11 projects (50%) in the inner Sukhumvit area, 4 projects (18%) in the Ploenchit area, 6 projects (27%) in the Silom-Sathorn area, and 1 project (4%) in a riverside area.
According to the Euromonitor, Thailand’s population will grow to 71.2 million by 2030. Rising disposable incomes ensure that rental growth is well supported. Thai consumers are becoming more sophisticated in their requirements for luxury goods. They see more new arrivals coming in special and limited collections which can draw their attention and trigger demand in the marketplace. As consumers give increasing weight to exclusivity, they aspire towards products with higher degrees of differentiation and uniqueness. Thailand had its wild property boom in the early 1990s and similar boom appears to repeat in 2017. New condominiums in Bangkok are selling well, with a take-up rate for new developments to be in the 80% range. The real estate market is set for tremendous capital growth over the next 5 years in addition to 8-10% percent returns just from rental income. Interest in Thai real estate has always traditionally shown strong correlations with tourism and trade trends, and in the first half of 2016, tourism was up 13 percent over the same period last year, according to the Tourism Authority of Thailand. A total of 7.5 million Chinese traveled to Thailand in 2015, more than any other nationality, according to official figures. That number is expected to continue to rise fast over the next decade.
Thailand's tourism industry accounts for about 10 percent of gross domestic product. The Tourism and Sports Ministry projects tourism revenue in 2017 will reach 2.71 trillion baht, of which 1.78 trillion will come from foreign tourists, growing 8.5% from 2016 The number of international tourists to Thailand is expected to reach 35 million in 2017, up from 32.5 million in 2016. Chinese visitors are up by about 30 percent, Russian travellers have come back and Americans increased by 12 percent. According to Bangkok Post, the Fiscal Policy Office predicts the Thai economy will expand by 4% in 2017. The Tourism Authority of Thailand (TAT) projects Chinese tourist arrivals in 2017 will grow to 9.8 million despite the zero-dollar tour crackdown, up from 8.8 million in 2016. Thailand ranks 28th among 61 economies, according to the latest ranking by the IMD World Competitiveness Centre.
Given the trend towards busier lifestyles in Thailand, more convenient property locations that can help to reduce the amount of time and effort involved in commuting are likely to prove especially popular. With Thailand seeing stability in its political situation and with the start of an economic recovery in the country, consumer confidence has begun to return. Real estate has become popular again especially condominiums which have grown in popularity following the expansion of the electric train system around Bangkok and its vicinity. The government’s economic stimulus package and the growth of new property development, along with the increased stability of the Thai government is all expected to help the recovery in consumer confidence. Low interest rate environments around the world continues to accentuate the attractiveness of prime real estate in the world’s leading business hubs and Thailand’s Bangkok is one of them. It is the dynamic cities attracting new sources of growth, including the wave of creative and technology industries that continue to be high on long-term investors’ agenda. Venture capital is increasingly flowing to entrepreneurs in a whole host of creative services using Bangkok’s relatively low cost base to start up new e-commerce platforms and online marketplaces where talented Thai software developers are winning global competitions like Microsoft’s Imagine Cup.