A customer takes a photo with his mobile phone at a Thai Airways pop-up airplane-themed restaurant at the airline’s headquarters in Bangkok on Sept. 10, 2020.

Mladen Antonov | AFP | Getty Images

Thailand will focus on spurring domestic consumption and reopening an economy badly hit by the impact of the coronavirus crisis, the country’s new finance ministry said on Monday.

Southeast Asia’s second-largest economy suffered its deepest contraction in 22 years in the second quarter as the pandemic hammered the key tourism sector and domestic activity.

The other main tasks include boosting liquidity, supporting tourism and accelerating public spending, Arkhom Termpittayapaisith told reporters on his first official day at work.

“The most urgent task is to boost liquidity for businesses affected by Covid-19 as the business sector accounts for 70% of GDP,” he said.

The government will continue to introduce measures to support domestic consumption, which makes up half of the economy, and tourism, Arkhom said.

Later on Monday, the cabinet will consider planned tax breaks to increase spending, which is estimated to add 120 billion baht ($3.9 billion) into the economy.

The ministry will speed up government spending, which accounts for 20% of GDP, including a delayed 400 billion baht budget earmarked for reviving the economy under a bigger 1 trillion baht borrowing plan, Arkhom said.

Regarding a persistently strong baht, Arkhom said it is “an unresolved problem” and the ministry will closely
monitor.

“But the central bank will take care of it,” he said, speaking after the baht hit a more than two-week high last week.

Longer-term measures will include reopening particularly to foreign tourists to help the economy to continue to expand next year, Arkhom said.

“Although the situation looks better next year and there may be a vaccine, it will still take one or two

Flood Week

Usually, the monthly PCE/Inflation/Income data and the Jobs numbers come out a week apart, with the former on the last Friday of the month and the later on the first Friday of the next month. But, this month, we are getting both back-to-back, so there is going to be a lot to look at before the weekend.

August Income

The changes in household balance sheets have been extraordinary. Looking at it cumulatively since March versus the February TTM average:

Versus the incoming February TTM average, households:

  • Earned $248 billion less;
  • But received an additional $793 billion in benefits, a surplus of $546 billion.
  • They consumed $504 billion less;
  • And paid $75 billion less in taxes and interest.
  • They took some of the savings and paid off $99 billion in revolving debt.
  • The net result is over a trillion dollars in excess savings.

Add that trillion dollars to:

  • An additional $1.2 trillion in bank reserves through last Wednesday;
  • An additional $1.3 trillion in Treasury’s general account through last Wednesday;
  • And an additional $1.3 trillion in nonfinancial business cash through the end of Q2.

Altogether, we’re looking at about $4.7 trillion in cash just sitting around earning a negative real interest rate.

So, we have 4 cash bubbles, but the most important is the household bubble, because the others will follow what happens there. There are many indications of a “K-shaped” recovery, with high income households doing fine, and low income household struggling. If this is just savings in high income/net worth households, there is much trouble coming.

So, the very first thing I will be looking at is the savings rate, and whether any of that bubble has shifted to consumption.

Consumption

The underlying story here is that there are many services: transportation, recreation, food, accommodations, and other high