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23 Aug 2017

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15.5% Growth in Imports, 7M17 Minimally Aligned with Private Investment Recovery (Business Brief No.3698 Full Ed.)

 Thailand's net international trade for July recorded the first deficit in 27 months, with USD19.040 billion in imports and USD18.852 billion in exports, growing 18.5 percent YoY and 10.5 percent YoY, respectively. Such double-digit growth in imports was only minimally aligned with the recovery in private investment, however, as evidenced by 15.0 percent growth in 1H17 imports, versus only a 1.0 percent rise in domestic investment by private businesses.

¨ The higher imports over the first seven months mostly comprised raw materials and intermediate goods, in line with rising exports. Such lofty increases were also a result of rising global crude oil prices, which pushed up the value of fuel imports, while volume remained the same.

¨ In capital goods imports, there was a 7.4 percent increase during 1H17, mostly involving aircraft, including ultra-light gliders, aviation parts and components, plus ships and floating structures. However, without those two categories, capital goods imports expanded only 3.1 percent, mainly electronics. This may imply that there were rising private investments during the period, mostly for export-oriented electronics manufacturing.

¨ Imports of industrial machinery remained in contraction at (-)1.4 percent over 1H17, consistent with only a 1.4 percent increase in private investments for machinery and equipment. Considering our machinery imports, high growth is normally an indicator of a private investment recovery.

Given the average growth in Thai exports over 7M17 was 8.2 percent, our outbound trade for the entire year is expected to approach the upper limit of our projection (3.5-4.5 percent).

Challenges that may impede exports include:

1. Uncertainties in exports of our better performing products: Many categories have registered decelerating export values, e.g., electrical appliances, computer equipment and parts.

2. A rapid appreciation in the Thai Baht in July, during which purchase orders for yearend shipments arrived: Thus, the appreciation could affect the margins of exporters.

3. Declining trends in export prices may pressure future export values.

4. China's exports could weaken over the remainder of 2017 due to a high base and a vague direction in US trade protectionism measures.

All in all, we are retaining our estimates on Thailand's imports and exports for 2017 at 8.2 and 3.8 percent growth YoY, pending further assessments of various factors ahead.

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