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Economic and Financial Outlook July 2023

25 Jul 2023

Monthly economic update: July 2023


Executive summary

Global Economy


  • In May 2023, international tourists signaled a weakening momentum going forwards. Meantime, global trade softened in line with a decline of industrial productions in several nations. A recent Tech-War retaliation by China would pose some limited impacts on global supply chain clearly in short run.
  • US economy has continuously softened both in merchandise exports and domestic demands, but labor market condition overall remained relatively strong. China’s recovery has also softened with a PBOC’s latest rate cut to spur domestic spendings. Most of ASEAN economies have turned weaker since the beginning of year 2023 mainly due to global trade drop. Recently there were diversifications in regional ASEAN central banks’ monetary policy operations.


Domestic Economy


  • In May 2023, the Thai economy improved slightly during election period. Private consumption improved from non-durable good purchase. Private investment indicators boosted up as temporarily effect of large amount of import of computers and related equipment as well as aircrafts.
  • Merchandise exports excluding gold improved from the previous month, which was mainly due to export of industrial products, while agriculture and agro-industry products were down. Moreover, exports to key markets mostly contracted, particularly in China and CLMV markets
  • The number of foreign tourist arrivals declined slightly from the previous month. Tourist arrivals from India and Malaysia slightly declined, while the number of Chinese tourists remained flat. 
  • Headline inflation in June 2023 eased to 22-month low due to the high base effect in fresh food and energy price. The minister of commerce revised down headline inflation forecast to 1-2% this year.


Financial Market


  • Major central banks around the world hiked policy rate to curb rising inflation but with slower pace. Market participants have pointed to possibilities of the Federal Reserve holding the policy interest rate as inflation pressures are lowered.
  • 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, signaling higher possibility of coming US economy recession. Meanwhile, 10y-2y yield spread for Thai government bond was still in positive territory. 
  • USDTHB largely depreciated in June, ending 35.60 level. It could be around 34.00-35.00 in July. US Dollar rebounded as investors consider probabilities of further rate hikes from the Federal Reserve (Fed) after the Fed pause its hike in June meeting.