Monthly economic update: June 2024
Executive summary
Global Economy
- In May 2024, the global economy remains resilient, supported by both the manufacturing and service sectors. Meanwhile, global inflation has shown a slowdown pattern, although it still lingers above 2%, the central bank’s target.
- The US economy has displayed clearer signs of cooling down, as recent data were softer than expected, especially regarding inflation pressures. The labor market has also slowed down. Given recent economic indicators, the market prices in a 50bps cut for the Fed by the end of this year.
- The Chinese economy remains fragile, mainly due to sluggishness in the property sector. Meanwhile, consumption shows signs of improvement, as indicated by an increase in retail sales; however, the sustainability of this improvement remains doubtful. On the bright side, exports have become a vital driver for the Chinese economy, as reflected in better-than-expected data
Domestic Economy
- In April 2024, Thai economy improved slightly from the previous month with a continued expansion in the service. Private consumption and investment displayed an improvement after slowdown in the preceding period. The number of foreign tourist arrivals dropped further as mainly from long-haul tourists despite the improvement in number of tourists from Malaysia, China and Middle East. The growth of merchandise exports in April grew considerably, which mainly from the low-base effect, while imports value continued to expand.
- Headline inflation in May 2024 rose dramatically in a year, which was mainly due to effects from the phase out of domestic diesel price subsidy and the increase in prices of fresh foods due to the extremely hot weather, while core inflation slightly rose in this month.
- In the MPC meeting of 3/2024, MPC voted 6:1 to maintain the policy rate of 2.5% with one member voting to cut by 25 bps. Given the recent MPC’s stance, GDP growth is expected to improve throughout the year, coupled with inflation rate gradually returning to the target range in the last quarter of 2024.
Financial Market
- Given the inflation outlooks, central banks are adopting different paces of policy easing. The ECB delivered a rate cut from 4.5% to 4.25%, in line with market expectations, while giving no signals on its next steps. Meanwhile, most central banks kept their policy rates steady, especially the Fed, which maintained rates at 5.25% to 5.5%. According to dot plots, policymakers expect just one cut in 2024, followed by four cuts in 2025
- The Thai baht depreciated from the year-end, consistent with its regional peers; however, the currency started to gain in June. This was driven by the end of seasonal dividend outflows and the Thai MPC's decision to hold the policy rate.
