Inflation and factory output rise as FDI confidence increases

Factory output rose for the first time in three months and inflation finally edged upwards after 16 months, according to statistics released last week, providing more positive signs that the Thai economy is back on track and heading for a full recovery.

Global executives have also been viewing the economy in a positive light as Thailand was once again ranked among the top 25 in the Foreign Direct Investor Confidence Index by Chicago-based international management consultancy A.T. Kearney. Thailand was ranked number 21 after having missed the top 25 during the past two years.

The Index is based on a survey of executives at leading multinational corporations, and 22 percent of the respondents said they were more optimistic about Thailand’s economic outlook over the next three years, compared to a year ago. The Index is a forward-looking analysis of how political, economic, and regulatory changes are likely to affect foreign direct investment (FDI) inflows into countries in the coming years.

In the ASEAN (Association of Southeast Asian Nations) region, Thailand was the only country in the top 25 besides Singapore, which was ranked number 10.

As Thailand’s ranking rose, so did factory output, according to the Ministry of Industry. The ministry’s manufacturing production index registered a 1.83 percent increase in March over the same month the previous year. That defied expectations, as a poll conducted by Reuters had forecast a fall of 0.1 percent for the same month.

According to customs statistics, industrial goods accounted for 80.4 percent of total exports in March, which was 1.3 percent more than the previous year. Automobiles and parts, jewelry and air conditioners were the drivers in higher factory output.

Capacity utilization was 72.5 percent in March, up from February’s revised figure of 65.6 percent.

The return of very modest inflation was also seen as a positive sign by most analysts. The consumer price index (CPI) edged up 0.55 percent in April compared to March, and 0.07 percent compared to April 2015, according to the Ministry of Commerce.

Higher prices for food, fuel, farm products and cigarettes propelled the rise in the index. Core inflation, which excludes food and energy prices, was 0.78 percent higher compared to one year ago, and 0.14 percent higher than in March.

“With steady core inflation rates in the first four months, we expect inflation from now on is unlikely to be lower than previous months in line with higher oil price prospects,” said Somkiat Triratpan of the Ministry of Commerce. “We expect inflation to pick up further in the third and fourth quarters of the year.”

The Ministry does not expect inflation, however, to exceed 1 percent for the year.