Monthly economic update: Jan 2024
Executive summary
Global Economy
- In December 2023, global economic momentum had been continuously softened as momentum in manufacturing sector remained weak despite improvement in services activities. This is in accordance with the influences of monetary policy tightening in major economies, which comes to an end in December 2023. Market participants have put more weights on interest rate cuts from major central banks over the next year.
- US economic activity had been expanding at a modest pace with supports from labor market resilience and private consumption.
- China’s economic recovery at a slower pace than market expectations though its performance in 2023 being slightly higher than the official target.
Domestic Economy
- In November 23, Thai economy stabilized from the previous month. While domestic demand increased from both private consumption and investment. The number of foreign tourist arrivals improved remarkably from the previous month in several nationalities, especially in long-haul destination while tourists from China improved slightly.
- The growth of merchandise exports in November stayed robust which was the fourth-consecutive month expansion, partially from the low-base effect and trade rebound. On the other hand, imports value remained solid with 2-month expansion from all import categories.
- Headline inflation in December 2023 was contracted in third-consecutive month, which was due mainly to energy prices including electricity and retail oil price, on the back of government measures, food prices also dropped further regarding to high-base effect while core inflation remained in this month. In 2023, headline inflation in line with targeted inflation but slightly below market expectation.
Financial Market
- Major central banks come to an end of their hiking cycle. Market participants and futures market have pointed out possibilities that the Fed would start cutting interest rates as early as in 1H2024 though anticipation for early cut in March 2024 declined since US economic momentum remained robust.
- Foreign capital outflows from Thai equity and bond markets were significant last year. This is largely contributable to market anticipations towards to end of hiking cycle in major economies.
- USDTHB appreciated in December, ending 34.20 level. It could be around 35.50-36.00 in January 2024, as market participants reassess the probabilities for Fed’s early interest cut in March 2024.
