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20 Aug 2009

Thai Economy

Thai Exports’ Deepest Contraction Subsiding: Single-Digit Drop likely in 2H09 (Business Brief No.2602)

The international trade data released by the Ministry of Commerce on August 19, 2009, showed that Thailand's exports during July 2009 had contracted 25.7 percent YoY, close to June's figure of (-)25.9 percent. Although the export contraction remains high, it could be said that our deepest export contraction has bottomed out because the export value had increased to THB12.908 billion, against USD12.335 billion in June, and the seasonally-adjusted export value has also shown growth over three consecutive months.
Meanwhile, the imports in July dropped by 32.5 percent YoY, against the contraction of 29.3 percent of June, due largely to a contraction in fuel imports. However, the import value rose to USD12.202 billion, against the value of USD11.398 billion in June. The imports of capital goods, raw materials and intermediate goods continued to surge, which is a positive factor for exports in the coming months. The trade balance in July posted a surplus of USD706 million, against USD937 million of June.
Overall exports during 7M09 totaled USD81.115 million – shrinking 23.9 percent – whereas imports totaled USD69.418 billion – shrinking 34.9 percent. The trade balance was in surplus at USD11.697 billion, while being in deficit of USD812 million YoY. The Ministry of Commerce has set a goal toward reducing the export contraction as much as possible and has revised their export target to -10.0 to -18.0 percent rate of contraction YoY, against the former projection of -15.0 to -19.0 percent.
The outlook during the coming months should feature exports tending toward improvement because the recessions of many importing countries have bottomed out in 3Q09 and growth will likely be seen in 4Q09. This trend will help spur export values in the future. It is expected that an average value of around USD13 billion a month will be achieved. As a result, the export contraction will improve to (-) 15 percent in August and begin to show growth in November. Moreover, it is expected that the export contraction will improve to single-digit growth in 2H09, against the deep contraction of 23.5 percent in 1H09. KASIKORN RESEARCH CENTER (KResearch) estimates that exports in 2009 will contract 14.5-17.5 percent. The lower range of the projection has softened from the former projection of -14.5 to 19.0 percent.
KResearch views that emerging markets, particularly Asia (China and India are the major markets in this region) should help boost Thai exports. In addition, with increased economic cooperation through many FTA pacts such as ASEAN-India FTA pact, service liberalization between ASEAN countries (pilot areas of goods and services) and ASEAN-China FTA agreement (investment) will promote international trade among ASEAN members. Also, the G3, being important export destinations, still play a great role toward our exports, but their domestic economies are still unstable. It is believed that the economies of those markets will decelerate after the effects of their economic stimuli diminish.

Businesses that will likely show the fastest recovery include those consumer product manufacturers, such as electronics, electrical appliances, food and garments. Meanwhile, production factors such as rubber, cassava, iron, chemical products and plastic products will grow in line with finished goods and demand from economic stimulus projects.

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