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Thai export, output plunge, but Q1 maybe low point

Posted on: May 5, 2009

Reuters – Friday, May 1

* Another plunge in exports after distorted Feb figure

* Manufacturing output in double-digit fall for fourth month

* Big trade and current account surpluses

* Data points to another interest rate cut next month

By Kitiphong Thaichareon

BANGKOK, April 30 – Thai industrial output, exports and imports plunged again in March, and economists said the economy probably shrank more than 5 percent in the first quarter from a year before, but some felt it might now have hit bottom.

Central bank data on Thursday showed exports fell 22.7 percent in March from a year earlier, in line with forecasts, after a drop of just 11.1 percent in February, although that figure was distorted by gold re-exports.

The bearish data will reinforce expectations of more rate cuts by the Bank of Thailand .

Exports, equivalent to 60 percent of gross domestic product, fell 19.9 percent in the first quarter from a year earlier, and imports plunged 38.3 percent.

BoT chief economist Amara Sriphayak estimated the economy might have contracted by 5-6 percent in the first quarter from a year earlier after shrinking 4.3 percent in the previous quarter.

Prime Minister Abhisit Vejjajiva also said he expected a contraction of more than 5 percent, and economists agreed.

“We project the economy will shrink by 5.8 percent compared to a contraction of 4.3 percent in the previous quarter,” economist Usara Wilaipich of Standard Chartered Bank said.

But the economy may now have reached its low point.

“The first-quarter GDP performance should be the worst of this year. We expect the contraction to slow down in the second half of this year, given expectations that manufacturers will have to rebuild their inventory,” Usara said.

The export-sensitive Manufacturing Production Index contracted by 15.4 percent in March from a year ago, the fourth straight month of double-digit percentage falls.

Analysts had expected a 19.0 percent decline and the outcome also led Nuchjarin Panarode of Capital Nomura Securities to say the bottom of the economic cycle may have been hit.

“The manufacturing index is what we are focusing on at the moment to find out when the economy will bottom. It shows some kind of improvement. This should be positive to the market, as it seems we have already reached the bottom in the first quarter.”


Even so, the grim data will keep up the pressure on the authorities to do more to stimulate activity, and not all economists are optimistic.

“Domestic consumption will face rising risks due to unresolved political concerns, which could hurt things like tourism and foreign investment over the long term, especially in the second quarter,” said economist Pimonwan Mahujchariyawong of Kasikorn Research Center.

Last week the central bank forecast that the economy would contract between 1.5 percent and 3.5 percent in 2009, with exports falling between 24.5 percent and 27.5 percent.

That would be the biggest slump since 1998 when Thailand was hit by the Asian financial crisis.

Imports were down a slightly smaller than expected 35.1 percent in March from a year earlier, after a 43.5 percent fall in February, the biggest since January 1998.

The country continued to enjoy big surpluses on its trade and current accounts of $2.17 billion and $2.40 billion respectively.

The central bank has cut rates by 250 basis points since December, taking the benchmark rate to a near five-year low of 1.25 percent [ID:nBKK437887].

It is expected to cut the rate by another quarter of a point at its next meeting on May 20. Some analysts have said it could trim it to 0.5 percent by the third quarter.

Private investment fell at a faster pace in March than the previous month, but the contraction in consumption was smaller than in February.

The central bank data showed Thai factories operated at an average 61.7 percent of capacity in March, up from 54.6 percent in February but still far below 75.8 percent a year earlier.

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