Thailand: Exports Remain Negative In October

Date: 2015-12-01

International trade continued to fall in October. Exports dropped by 8.1% from the same period last year, marking the tenth consecutive monthly contraction. From January to October, the cumulative export value contracted by 5.3%. Key reasons remain sharp drops in worldwide prices of agricultural products, soft external demand from the weak global economy, plunging oil prices. Exports of agricultural and agribusiness products fell by 10.3%, driven by lower shipments of rubber, rice, tapioca products and frozen, processed and canned seafood. Exports of industrial products also declined by 6.6%, led by weakness in oil-related products such as finished oil, chemicals and plastic pellets. However, auto exports rose by 36.4% due to an improvement in pickup exports to Asia, Australia and the Middle East, and in eco-car exports to Europe and North America. Consequently, we expect that Thailand’s export value would contract by 5.0% in this year.

ƒ In October, import growth fell by even more than exports to -18.2%, following a decline of 26.2% in previous month. October imports of capital goods rose by 2.5%, but raw material imports tumbled by 21.3% and consumer goods slipped by 9.1%. Combined import value in the first ten months dropped by 11.3%, pointing to continued weakness in domestic demand.Nevertheless, this was not surprising since subdued domestic and global demand as well as declines in businesses’ confidence resulted in low manufacturing production and private investment. In addition, falling export incomes and the impact of the drought on farmers’ income prompted households to exercise more caution towards spending and caused private consumption to slowly recover. As a result, Thailand achieved a trade surplus of USD 2.1 billion in October and USD 9.9 billion for the first ten months of this year. Consistent with this, we expect October industrial production to present a similar pace of contraction as in the previous month.

ƒAlthough October international trade remained weak, we expect the Bank of Thailand (BoT) will likely keep the policy rate unchanged at 1.50% in the December MPC meeting since Thailand’s 3Q15 GDP data indicated that the country has continued to gradually recover at a gradual pace. In line with our expectations, the 3Q15 GDP growth slightly expanded to 2.9% y/y from 2.8% in the previous quarter. On a quarter-on-quarter, seasonally adjusted basis, the economy grew by 1.0% from a downwardly revised 0.3% in 2Q15. Moreover, economic stability was well maintained. October headline inflation remained negative. The CPI inflation is projected to stay in negative territory for the rest of 2015, before rising gradually and turning positive in 1Q16. Meanwhile, deflationary risks are limited as year-to-date core inflation is still positive, reflecting that prices of most non-energy items have been stable or trended upwards. The current account continued to register a surplus and the ratio of foreign reserves to short-term external debt remained sound. Furthermore, current monetary conditions, including exchange rate development, are supportive to the economic recovery. Thus, the limited policy space should be preserved for future utilization as there remain downside risks to economic growth from both external and domestic sources. We still maintain our end-2015 USD/THB forecast of 35.50 representing a 7.0% depreciation over 2014. (UOB)

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