Dr. Kirida Bhaopichitr, Director, TDRI Economic Intelligence Service (EIS), TDRI discussed the overall outlook of the global and Thai economies, "According to our assessment, we believe that the Thai economy in the second half of the year will be better than the first half while the global economy continues to face many uncertainties such as issues of economic recession in the United States and Europe, the escalating geopolitical tensions between China and the United States, and the ongoing Russia-Ukraine war. The World Bank expects the global economy to grow at only 2.1% this year, the lowest in three decades, while global inflation is 7% compared to 8.7% in 2022. OPEC+ production cuts will also keep energy prices high although the most commodity prices have peaked."
"In the United States, the collapse of banks continues to cause a drop in deposits and credits of commercial banks and a slowdown of the commercial real estate market. Many research houses expect the U.S. economy to enter a recession by the end of 2023 due to the banking crisis and a slowdown in purchasing power from high-interest rates. Meanwhile, the FED signals that the current rate-hiking cycle will soon end. The World Bank forecasts the 2023 U.S.'s real gross domestic product (GDP) growth at 1.1%, compared to 2.1% in 2022. On the other hand, The European Union's GDP is projected to expand by 0.4% this year, compared to 3.5% in 2022, and interest rates are likely to remain high in the EU as inflationary pressures continue to broaden. The risks in the financial and real estate sectors remain lower than those in the U.S."
"China's economy is on track to a gradual recovery as a result of lifting its zero-COVID policy and the gradual reopening of its border earlier in the year. In addition, both the manufacturing and service sectors showed positive signs of recovery, and the real estate sector has begun to recover from its lowest point. With less than 1% inflation and a stable currency, China's economy is expected to grow by more than 5% this year. However, the Chinese Government has a set a GDP growth target of only 5%, which could signal a policy shift from targeting strong growth to higher employment and equitable growth. Moreover, China's rise in influence in the Middle East, could lead to greater peace and economic activity in the region, while forming new collaborations between China, Russia, and Middle Eastern countries."
"Regarding the Thai economy this year, real GDP may expand at 3.5% with international tourism receipts as the main driver. The Bank of Thailand forecasts 29 million tourists in 2023 and 35.5 million in 2024, while the export value will decrease from last year. Although Thai exports may benefit from the reopening of the Chinese economy, there remain risks from the economic slowdown in major export markets. Household consumption has continued to recover and the Consumer Confidence Index in April 2023 reached the highest level since the pre-Covid period in March 2020. This is a result of the recovery of the tourism sector which has resulted in a decline in unemployment and income growth from increased employment in the hotel and restaurant, construction, trading, and manufacturing industries. It is expected that employment will continue to increase, although there are concerns about high production costs, minimum wage increase, and potential economic uncertainty. However, the highest increase in household debt since the COVID-19 outbreak reaching almost 90% of the current GDP will limit future consumption. In addition, the current political instability may delay the 2024 budget, hence the government spending in 2023 will not increase much from 2022."
"The Thai economy in the second half of the year will grow faster than in the first half due to the recovery of tourism, exports to China, and domestic purchasing power. Inflation in the second half of the year will slow to less than 2% due to lower energy prices. However, there are still inflationary pressures from many factors, such as producer costs being passed on to consumers as a result of demand-side recovery, electricity price hikes, and rise in the minimum wage. Thailand's policy rate is expected to be hiked to 2.25-2.5% by the end of the year."
Mr. Chutidej Chayuti, Chief Financial Officer "KTC" or Krungthai Card Public Company Limited, revealed, "TDRI's assessment of the Thai economy in the second half of the year indicates a likely expansion. This is in line with the data of the Bank of Thailand which is a result of the growing tourism sector which in turn created employment and generated income. This is believed to positively impact and grow the overall outlook of the credit card and personal loan industry. In Q1 of 2023, KTC's percentage of credit card receivables compared to the industry was at 14.8%. The spending volume grew by 22.5%, higher than the industry's by 17.7%. The company's market share of card spending was 12.2% and its personal loan receivables ratio relative to the industry was 3.8%."
"The expansion of the economic sector in the first quarter has enabled KTC to operate its business in alignment with its goals and achieve significant growth in the spending volume. One important factor was the government's lifting of the COVID-19 lockdown measures which resulted in various business activities causing domestic economic recovery. The reopening of the country has expanded tourism and generated more income for the country. Besides, KTC has planned strategies to penetrate the market to prepare for future economic expansion after the relaxation of lockdown measures. We have issued two travel credit cards, namely the KTC - AGODA MASTERCARD and KTC JCB ULTIMATE credit cards as well as selected various privileges from all spending categories deemed important, necessary, and expected to be popular, such as travel privileges, privileges in the restaurant category covering all types of individuals who are passionate about food, fuel and insurance privileges, health and beauty privileges, and much more."
"In Q1 of 2023, KTC's total receivables portfolio has a growth rate at 14.5% year-over-year, with total loans to customers and accrued interest receivables of 103,312 million baht. Meanwhile, the company and its subsidiaries continue to manage financial costs prudently and efficiently at 2.6%, the same level compared to the same period last year. We are also able to control the loan quality well with a total NPL of 1.9%. We're confident that the quality of the total portfolio can be maintained according to the target set with a higher profit forecast for 2023 than expected."
"We believe that the improving economic situation, increased employment in the tourism industry and other service businesses will lead to more household consumption, business investment, tourists in Thailand, and international travels. These factors will benefit and push all KTC receivables portfolios to expand and increase credit card spending. Merchant businesses that accept payment gateways with grow from the expanding demand sector in Thailand, domestic spending, and foreign tourists who travel into Thailand even though interest rates are likely to rise. The company's finance costs are still able to support the growth target. KTC's aims for business growth in 2023 are as follows: over 7,079 million baht in profit, a 15% growth in total receivable portfolios exceeding a hundred thousand million baht, a 10% growth in credit card spending, a 7% growth in the 'KTC PROUD' cash card receivables portfolio, an increase of 9,000 million baht in total 'KTC P BERM Car for Cash' loan approvals, and NPL less than 1.8%, the same rate in 2022."
"Another aspect of business operations that is always top of mind for KTC is better integration of sustainability strategies in the Environmental, Social, and Governance aspects. We have conducted business with responsibility with a continuous aim to develop products, services, technology, digital innovations, and personnel to meet business needs, build trust among stakeholders, increase opportunities for access to financial products and services in Thai society, mitigate environmental impacts, and support the United Nations Sustainable Development Goals. All of KTC's subsidiaries
also carry out various projects to support debtors in accordance with fair credit management guidelines in line with the Bank of Thailand's announcement to upgrade the supervision of management to provide
fair services to customers by prioritizing and promoting assistance, following up, and solving debt problems to offer targeted and prompt solutions to retail debtors who are facing issues of debt. This
also includes the development of a sustainable credit lending process from beginning to end. So far, KTC has assisted debtors in all circumstances in the amount of 1,995 million baht, accounting for 2.0% of the total debtor portfolio (as of 31 March 2023)."
Source: Krungthai Card
