A growing value of Thai exports in March 2012 reflected the substantial recovery in the Thai industrial sector. Although the exports contracted 6.5 percent YoY in March due to last year's high base, their value grew for two straight months by 4.3 percent YoY. Imports rose 32.1 percent MoM, or 25.6 percent YoY, led by crude oil, capital goods, intermediary products and gold.
Thai exports have recovered steadily since early 2012 in line with a manufacturing sector rebound. Resumed growth in automobile and electronics exports have helped slow the contraction in Thailand's overall outward trade in 1Q12 to (-)3.9 percent YoY, from (-)4.8 percent YoY in 4Q11. However, that positive sign remains subdued as it shall likely require some time for production lines to return to normal output levels amid weak demand from key export markets e.g., the US, Japan and Eurozone (G-3), as a result of the Eurozone debt crisis and skyrocketing crude oil prices. In addition, Thai agricultural export prices have declined steadily from last year's.
KResearch has assessed that this gradual industrial recovery will be hand-in-hand with exports in coming months. Thus, Thai exports should resume growth in 2Q12. Nevertheless, bleak prospects in the global economy, inhibited by the European debt debacle, a slowing Chinese economy and crude oil price volatility, may dampen our exports over the remainder of 2012. In addition, rising production costs due to higher wage and fuel costs may affect Thai export competitiveness, especially products that are already at a disadvantage vis-à-vis rivals.
Nevertheless, growing border trade will continue to provide a viable opportunity for Thai exports to the neighboring states of Cambodia, Laos, Myanmar and Vietnam, as their economies will continue to grow over the next few years. Thai exporters are advised to bolster shipments of capital goods/machinery, primary and intermediary products to Myanmar, given their recent open door policy that will definitely attract substantial new foreign investment in the near future. In addition, rising purchasing power and economic growth within neighboring nations will provide huge opportunities to export familiar consumer products to them.
As for the outlook on Thai exports in 2012, we at KResearch maintain our growth forecast of 10.0 percent (base-case), or within a range 7.0-15.0 percent, pending global economic prospects and agricultural prices over the remainder of 2012.