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Economic and Financial Outlook December 2022

22 Dec 2022

Monthly economic update: December 2022


Executive summary


Global Economy


§ Global price pressure has been further easing as can be seen by declines in energy and non-energy commodity prices and freight rate.

§ Global economic activities faced deepening contraction in both manufacturing and services sector with a prominent downturn in Europe and soften momentum in Asian nations.

§ Global trade has been declining since Q3/22 with a recent export slowdown across G3 and Asian nations, pronouncing a greater risk of recession in 2023.

§ Regarding G3 economy, apart from declining exports, domestic demands have also softened while inflation elevated. This triggered a new course of smaller-size interest rate hike.

§ Chinese economy has faced multiple headwinds with a surge in infection after abrupt relaxation of harsh COVID-19 restrictions, Japanese economy is about to weaken further due to export slowdown, COVID-19 case surge and deterioration in households’ purchasing powers. ASEAN economy are to remain robust from continuous support of domestic demands, while merchandised exports have eased.


Domestic Economy


§ In Oct 22, Thai economy continued to recover but at a slower pace for fourth consecutive month. Private consumption indicators slightly declined from the previous month. Nevertheless, service sectors continued to improve in line with increases in foreign tourist figures. Several fundamental factors including employment, income, and consumer confidence continued to improve.

§ Private investment indicators slightly declined in this month, mainly from the machinery and equipment category corresponding with overall industrial production.

§ The value of merchandise exports (ex. gold) contracted in all categories, mainly from major industrial products (computer and parts, plastic pallet etc). By key partners, mostly also declined. 

§ Foreign tourists in Oct increased consecutively to reach a new peak since pandemic. The major groups still came from East Asia. Moreover, Russia and Europe tourists returned.

§ Headline inflation in Oct decelerated further due to food prices dropped and energy price stabilized while core inflation remained mark over 3% level.


Financial Market


§ Major central banks around the world hiked policy rate to curb rising inflation. The Federal Reserve hike 50 bps on 14-15 December. Meanwhile, the next rate decision of Federal Reserve is expected for at least 75 bps by the end of 2023.

§ Investors went into long term bond tenor, for both US and Thai bond, due to recession concerns. Moreover, 10y-2y yield spread for US government bond dropped below zero, negative yield curve signal higher possibility of coming US economy recession. Meanwhile, 10y-2y yield spread for Thai government bond was still in positive territory. 

§ USDTHB largely appreciated in November, ending 35.35 level. It could be around 34.50-35.00 in December. Dollar would tend lower in short term on soft inflation data and slower pace of Fed’s interest rate hikes.