Global Economy Weakens, Thailand Spending Improves But Fragile
Thailand's economy improved in Q3 thanks to government stimulus, but faces headwinds as spending programs shrink and energy costs threaten to squeeze household budgets despite easing overall inflation.
Krungsri Research's weekly economic assessment finds global energy supply disruptions will continue despite Iran and Oman agreeing on shipping protocols through the Strait of Hormuz, with the outcome depending primarily on U.S.-Iran negotiations. High barriers to talks remain after Iran considered legislation banning U.S., Israeli, and hostile nation vessels, keeping energy prices elevated.
The U.S. labor market contracted more than expected in July, with non-farm employment falling 23,000 positions against a forecast of 88,000 gains, while hourly wages slowed to 3.2% year-on-year from 3.4%, below the 3.5% expectation. Despite inflation remaining above the 2.0% target amid high energy prices and trade tariff risks, weakening employment and wage growth are expected to ease demand-side inflation pressure, likely supporting the Federal Reserve in holding policy rates at 3.50-3.75% through year-end.
China's exports drive growth amid weak domestic consumption, with high-tech goods expanding over 50% for a third straight month. The trade war with the U.S. is expected to continue in limited form, with average tariff rates potentially rising but unlikely to exceed previously agreed levels, while controls on advanced technology and military-related goods will remain ongoing policy tools.
Thailand's third-quarter economy benefits from government stimulus measures but faces uncertainty ahead. By end-July, the "Thai Help Thai Plus" program had distributed 86.4 billion baht total—49.6 billion from the government and 36.8 billion from public participation. General inflation eased to 1.95% in July from 2.42% in June due to fuel price adjustments, though processed food prices rose broadly, pushing core inflation to 1.34% from 1.23%.
Despite improved spending and moderating inflation in Q3, Thailand faces economic headwinds ahead: consumption stimulus may fade as Q4's "Thai Travel Thai Plus" carries only 1.75-2 billion baht versus the 120 billion baht in the Help Thai Plus program; medium to long-term measures, particularly the 200 billion baht energy transition investment plan, remain unclear; and cost pressures from high producer prices (PPI at +7.26% in July) may gradually pass through to consumers, squeezing household purchasing power.
