Confidence levels among Thai consumers reached a seven-month high in August, registering 74.5 points on the index produced by the University of the Thai Chamber of Commerce, while the economy bottomed out in the second quarter, growing by 2.3%. Official figures also showed unemployment to be far lower than the 1m commonly suggested, with just 1.4%, or 500,000, of the workforce jobless.
Though Thailand's industrial production is still well down, 7.3% lower in July than it was for the same month a year ago, according to figures released on August 31 by the Bank of Thailand (BoT), the downward trend is easing, with the July result being the lowest decline in nine months, and a marked improvement on the 8.3% recorded in June.
Amara Sriphayak, the director of BoT, said the country's economy was coming out of recession, with key economic indicators continuing to show improvement.
"There was more production of sugar, rubber, cars, tobacco and beer in July because of rising demand and restocking," Amara said. "Exports have improved, which helped raise production and lessened unemployment. The continued fiscal spending also helped support economic recovery."
Not surprisingly, the government is taking credit for much of the recent improvement and the recovery expected in the coming months.
The government's $3.4bn economic stimulus package, along with plans for additional state spending on infrastructure, is expected to promote growth and reduce unemployment, Prime Minister Abhisit Vejjajiva was quoted as saying by Channel NewsAsia on September 15. While the momentum from the stimulus programme will continue into the medium term, Abhisit said he was bullish but not complacent.
"The package that we are putting through now, and which will go ahead for the next three years, is not only designed to create jobs. It will certainly do that, about 1.5-2m new jobs, but it will also to increase the competitiveness through overdue investment in key infrastructure," he said.
Though the economy is starting to pick up, at least in some sectors, there have been concerns increasing domestic demand is in part fuelled by the state's fiscal stimulus programme.
BoT is keeping a close watch on monetary policy, seeking to encourage steady recovery by keeping its benchmark interest rate at a near record low of 1.25%, while ensuring rising demand does not fuel inflation, which it predicts will finish the year at 1.5%.
On September 15, Tarisa Watanagase, the governor of BoT, played down concerns that either rates or inflation would be making any upward movement in the short term.
"It shouldn't be a concern that inflation will rise anytime soon," Watanagase told the BoT's annual economics symposium. "So, there are no concerns that the central bank will raise the rate in the short term."
Though Watanagase said the economic crisis had ended, the recovery was still fragile and the political factors had to be taken into account, referring to the ongoing protests and civil unrest by supporters of former prime minister Thaksin Shinawatra.
In mid-September, the government enacted the Internal Security Act (ISA), granting the armed forces wide powers to police political rallies, in particular the one planned by Thaksin's support base, the United Front for Democracy against Dictatorship, scheduled for September 19.
According to the finance minister, Korn Chatikavanij, activating the law was essential to protect business confidence, which he said had been harmed by earlier protests in April. Along with maintaining public order, the main objective of invoking the ISA was to prevent any possible negative impact on the economy, particularly on trade and investment, said Korn.
"If the government did not invoke the security law, the confidence of the people and investors could suffer much more," he said.
Even if the government can avoid further political turmoil and any undermining of business confidence, there is still a long way to go before the Thai economy will be able to offset the losses of the past 12 months. According to a recent study by the Kasikorn Research Centre, the economic crisis has cost the country $25bn, with the economy still being held back by political unrest, lower agricultural output and weak consumer demand.