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21 Apr 2009

Thai Economy

March Exports Contracted 23.1%, Exports Depend on Chinese & US Recoveries(Business Brief No.2484)

The latest international trade data released by the Ministry of Commerce on April 21, 2009, showed the total export earnings in March 2009 at THB11,555.6 million, shrinking 23.1 percent YoY. Although overall exports in March showed a deeper contraction than the 11.3-percent shrinkage recorded in February, exports (excluding gold) in March shrank 24.5 percent, somewhat closer to the 24.6-percent shrinkage recorded in February. This indicated that the export situation had remained largely unchanged, which is a positive signal. March imports totaled USD9,454.9 million, down 35.1 percent, showing a slight improvement over the 40.3-percent shrinkage of the previous month. With higher export than import, the trade value was in surplus of USD2,100.7 million, dropping from the trade surplus of USD3,577 million in February. In 1Q09, exports had shrunk 20.6 percent and imports had shrunk 37.6 percent, with a trade surplus of USD7,054.7 million, against the deficit of USD812 million in 2008.
It was found that the majority of key export products, such as computers plus accessories and parts, cars plus accessories and parts, rice and rubber had all shown deep contractions. Meanwhile, raw material imports, including component parts and instant foods had also shrunk significantly. This indicated that production in major industries had not recovered yet.
Factors determining the export trend over the next few months include the economies of major trade partners, particularly China and the USA, which are signaling some improvement. The Chinese economy might recover in 2Q09. As for the US economy, many economic indicators were beginning to show positive signs. Currently, it is believed that the US economic crisis has bottomed out. Nonetheless, real recovery might take some time.
KASIKORN RESEARCH CENTER (KResearch) expects that the signals toward global economic recovery will not boost Thai exports immediately in 2Q09, because the improved Chinese economy is only being seen in domestic demand, i.e., domestic consumption and investment. There are few Thai exports to China that would gain immediately from their improvement (affecting less than 25 percent of Thai exports there, and only 2 percent of all Thai exports). However, if there are continuous improvements in the Chinese economy and stimuli continue to work, and the USA and Japan continue to rebuild their economies in a sustainable manner, these will help support Thai exports in 2H09.
KResearch expects that 2Q09 exports will show a deep contraction and 1H09 exports will have contracted approximately 23 percent. Meanwhile, the export trend in 2H09 may coincide with economic recoveries in key regions, but they might be affected by indirect risks such as domestic political uncertainty. If unrest continues to erupt (which could lead to paused production and transportation flows, thus lessening the confidence of international buyers toward ordering our export goods), orders from other countries might falter.

Regarding both positive and negative factors that include signs of recovery with major trade partners expected by the end of this year, we project that highly contracted exports will persist throughout 1H09, followed by uncertainty that will be dependent upon the economic growth of importing countries, and likely still be lower than their potential until 2010. KResearch projects that Thai exports throughout 2009 will contract 16.5-20.0 percent YoY.

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