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Retailers hope US$188b engine of Thai economy will revive

[BANGKOK] The distributor of Nike Inc's Converse brand in Thailand is hopeful of a revival in consumer spending once a yearlong mourning period for King Bhumibol Adulyadej ends on Oct 29.

Whether Rich Sport Pcl chief executive officer Papitch Wongpaitoonpiya is proved right will help to determine the strength of a rebound in the Thai economy, since household consumption is worth about half the country's US$407 billion gross domestic product. Spending has been subdued amid grieving for the monarch, most visibly in a preference for monochrome clothing.

"Almost all retailers are highly optimistic consumer spending will finally recover after October," Ms Papitch said in an interview.

"It's been a gloomy environment for the retail sector, especially clothing. It's been very hard to sell products in colours other than black and white. That's understandable, as the whole country has been in grief."

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The mourning period for King Bhumibol, who died Oct 13 last year, will conclude after a five-day, US$90 million cremation ceremony that starts Wednesday and is expected to bring Bangkok to a standstill. Flags are flying at half-mast, and commemorative portraits of the revered monarch are dotted across the capital.

Household expenditure is worth about US$188 billion, according to the World Bank. Private consumption expanded at an average pace of 2.5 per cent this year, compared with 3.5 per cent in 2016, Bank of Thailand data shows.

Investors appear to be betting on a revival, with the 22-member Stock Exchange of Thailand Commerce Index rising 11 per cent so far in 2017, beating the 10 per cent climb in the overall stock market.

One obstacle to a bigger impetus from consumers is the elevated level of Thai household debt, swollen by now-defunct policies such as an incentive programme that encouraged car purchases.

Domestic private-sector credit exceeds 140 per cent of GDP, the most in major emerging South-east Asian economies, World Bank data shows. Household debt has climbed to 78 per cent of GDP from roughly 70 per cent five years ago. Lenders are grappling with a build up in soured loans.

"The end of a yearlong mourning period might unleash some pent-up demand," said Euben Paracuelles, a senior economist for South-east Asia at Nomura Holdings Inc in Singapore.

"However, there are still strong structural forces at play, particularly the on-going household deleveraging."

For now, exports and tourism are driving the pick up in economic growth. But while the 3.8 per cent GDP expansion expected by the Bank of Thailand in 2017 would be the fastest pace in five years, it would still lag behind neighbours such as Vietnam, Malaysia and Indonesia.

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