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Economic and Financial Outlook March 2023

23 Mar 2023

Monthly economic update: March 2023


Executive summary

Global Economy


  • Global manufacturing PMI in February 2023 showed recession is not as severe as expected. US and Europe have showed signs of pulling out of downturns.
  • China growth has picked up sharply, mainly driven by services sector. However, its manufacturing sector has softened due to weak global demand conditions but is expected to resume soon.
  • While global energy prices and supply chain pressure have steadily eased, non-energy price rose in metals, mainly that of iron ore. This was due to the greater pressure from China’s iron ore restocking and a supply slump in key exporters. Overall pressure on global inflations have however dropped steadily.
  • Declining but elevated inflation, Federal Reserves would continue in hawkish stance with smaller size of rate hike amid strong labor market condition.
  • With rising interest rate environment, several nations have recently faced difficulty to service high level of public debts, especially European counterpart. In the meantime, they have left with limited fiscal buffers to tackle the spikes in food and energy prices.


Domestic Economy


  • In Jan23, Thai economy improved from the previous month. Private consumption indicators increased on the back of government’s stimulus measures and thanks to the tourism expenditure. while consumption of durable goods improved, following a pick-up in delivery of vehicles’ backlog orders.
  • Private investment indicators, picked up from investment in machinery and equipment. Investment in construction, however, declined from both permitted areas for construction and sales in construction material.
  • The value of merchandise exports, excluding gold, performed gradually improved, which was in line with development in the manufacturing production and private investment indicators.
  • Foreign tourists dropped slightly in this month but remaining over 2 million persons. The major decrease came from short-haul groups. However, Russia and Europe tourists continuously rebounded.
  • Headline inflation in Feb23  eased to 13-month low due to the further drop in food and energy prices, as well as the core inflation, which declined to below 2% for the first time in a year.


Financial Market


  • Major central banks around the world hike policy rate to curb rising inflation but with slower pace. Market participants have lowered possibilities of the Federal Reserve delivering 50-bps rate hike on 21-22 March meeting as worries about US banking system loom large.
  • 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 February, ending 35.14 level. It could be around 34.50-35.00 in March. US Dollar would appreciate in short-term as better-than-expected US jobs report raised the likelihood of the Federal Reserve keeping on with its inflation-fighting interest rate hikes for longer.