Thailand economy in spotty recovery

A shopper walks past stalls at the Klong Thoei market in Bangkok. Thailand’s factory output fell but exports and consumption rose yesterday, suggesting the economy is struggling to gain momentum after a coup ended months of political unrest five months ago.

Reuters

Bangkok

Thailand’s factory output fell but exports and consumption rose yesterday, suggesting the economy is struggling to gain momentum after a coup ended months of political unrest five months ago.

Confronting weak demand both at home and abroad, the country’s military leaders are depending on infrastructure spending to prop up economic growth though most of the projects will not filter through to the bottom line until next year.

Economists say the mixed September data means the central bank will continue to keep interest rates low to support the fragile recovery.

“Overall, Thailand’s economy is seeing a gradual recovery but the environment is still weak in terms of household spending and private investment,” said Thammarat Kittisiripat, economist with TMB Bank in Bangkok.

Factory output in September fell for an 18th straight month, industry ministry data showed yesterday, down 3.92% from a year earlier, and compared with a forecast 0.50% drop in a Reuters poll.

Later, the Bank of Thailand (BoT) released other September indexes, including one showing that private consumption – which accounts for half of the Thai economy – rose a seasonally-adjusted 1% in September from the previous month.  Its index on private investment inched up 0.1% in September from August, the central bank said.

“In September, the Thai economy improved from the previous month. Overall, however, the recovery in economic activities remained at a slow pace,” it said in a statement.

“Economic activity in the third quarter of 2014 recovered at a slow pace and not in all economic sectors,” it added.

On Tuesday, the Commerce Ministry released customs-cleared trade data which showed annual exports unexpectedly rose 3.2% in September and imports surprisingly jumped 14.4%, in a rare piece of good news for the military junta.

The central bank, which always issues its own trade numbers, said yesterday that September exports were 2.2% higher and imports rose 10.1%. Many imported materials are assembled into completed products and shipped out again. However, the positive trade data is helped by special factors and the gains may not be sustained, economists say.

Southeast Asia’s second-largest economy avoided a recession in April-June but recent indicators show economic engines, including exports and consumption, have yet to fire.

The Bank of Thailand, which next meets on November 5, was seen having little reason to lower rates further, given the high level of household debt.

Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said “change in the policy rate does nothing for the household debt. Cutting rates is beating a dead horse.”

Siam Cement, Thailand’s largest industrial conglomerate, said this week it expected no growth in domestic cement demand in the fourth quarter from a year earlier. But it sees demand rising at least 5 percent in 2015 as the government starts infrastructure projects.

Chatrchai Tuongratanathan, executive director of the Thai Retailers Association, said spending from low-income people would take time to recover but richer households could help lift overall retail sales growth to 6%-8% this year.