Thai exports fell for a second straight year in 2014, a blow for the military government as it struggles to get the economy growing and possibly increasing pressure on the central bank to cut interest rates today.
Exports are worth more than half of the country’s gross domestic product. For 2014, exports were 0.4% lower than the previous year, the commerce ministry reported yesterday.
The rate of decline was slightly steeper than the previous year, when exports contracted 0.3%.
For December, exports rose 1.9% from a year earlier, well above the 0.5% gain seen in a Reuters poll.
Imports in the last month of 2014 were down 8.7%, much lower than poll’s projected fall of 2.45%, while for the full year they tumbled 9%.
Gundy Cahyadi, economist with DBS Bank in Singapore, said the “surprisingly” soft imports reflected lower oil prices but also that domestic demand remains weak.
The Bank of Thailand’s monetary policy committee holds its first meeting of the year today. Sixteen out of 20 economists polled by Reuters the policy interest rate to be held at 2%.
Four predict a 25 basis point cut, which would be the first change since March. Finance Minister Sommai Phasee said on Friday it was up to the central bank, but added he felt there “must” be a cut to help the sputtering economy.
Santitarn Sathirathai, senior economist from Credit Suisse in Singapore, said it’s tough to call but he expects a cut today.
“If they don’t do it tomorrow, we expect them to do it next time, so I think it will be delaying the inevitable,” he said.
Others say cutting the rate won’t help growth, and could bring rises in Thailand’s already-high levels of household debt, which are curbing consumption.
Exports and domestic demand are the two main engines of Thai growth, and neither fired well last year. On February 16, the government is expected to announce the economy grew by only around 1% in 2014, the weakest since flood-hit 2011. In May, after political tensions that began in late 2013, the military took power, saying this was needed to restore order and spark a recovery for Southeast Asia’s second-largest economy.
The coup restored some confidence, but domestic consumption has remained tepid at best, and government spending has not gotten firmly on track. At the start of 2014, authorities expected exports to increase at least 5% that year. Yesterday, the commerce ministry reiterated its view that exports can rise 4% in 2015. The central bank forecasts a 1% increase. The ministry said shipments to China were down 19% in December, and off 8% for 2014. Exports to the US rose 4.1% last year.
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