Macro and Politics

*The Real Sector Confidence Index (RSCI) declined from 101.4 in June to 100.3, retreating to its lowest level since the beginning of the year, while the seasonally adjusted index decreased from 98.6 to 98.4, marking its lowest point since August 2024. It is worth recalling that readings below the threshold of 100 in the RSCI reflect a waning sentiment among real sector representatives regarding economic activities. Meanwhile, the Capacity Utilization Rate (CUR) slipped from 75% to 74.6% in June, while the seasonally adjusted CUR dropped from 75.1% to 74.4%. Following the heightened political angst and market volatility since March 19, we began to observe adverse impacts on leading indicators from April onwards. Within this context, the decline in the RSCI seen in April and May has evidently intensified in June. We anticipate that the growth, which commenced positively in 2025 supported by robust domestic demand, will shift towards a weaker footing by the second quarter. Household consumption - driven by sustained momentum in credit growth trends and the pre-March 19 interest rate cuts - delivered the strongest annual growth contribution of 1.6% in the first quarter; however, we expect its supportive effect to dwindle, albeit modestly, in the second quarter. Meanwhile, we project industrial activity to experience a deepening slowdown. Although the downside risks to growth outlook have increased following tighter financial conditions domestically post-March 19, high-frequency data have yet to indicate a clear cooling in domestic demand dynamics. On the other hand, public expenditure continues to provide a supportive backdrop for the growth outlook. Accordingly, we maintain our growth forecast at 3.1% currently.