Thai factory output fell for a sixth straight month in September, adding to a string of weak data that has raised doubts about how quickly the export-dependent country can exit recession. The output data, unveiled on Monday, came in the wake of surprisingly poor September exports, and the central bank's latest downward revision of its forecast for economic growth.
The Bank of Thailand now sees 2013 growth at 3.7 percent, having cut it from a previous forecasts of 4.2 percent in July, and 5.1 percent in April. Encouraging data for August had raised hopes that Southeast Asia's second-biggest economy, after Indonesia, would escape the mild recession it entered in the first two quarters of this year.
The September figures, however, showed the economy was still struggling to turnaround. Third-quarter gross domestic product (GDP) data is scheduled for release on November 18. Thammarat Kittisiripat, an economist at TMB Bank in Bangkok, said he expects quarter-on-quarter performance for the three months ended in September "will likely be flat or slightly negative".
More optimistic is Gundy Cahyadi, an economist with DBS Bank in Singapore, who said he has pencilled in "slight GDP growth" on a quarterly basis for July-September. Cahyadi said September's numbers make "below-trend GDP growth almost a certainty this year", partly due to a high base effect. Last year, GDP expanded a robust 6.5 percent, recovering from flood-devastated 2011, which only had 0.1 percent growth.
Data released on Friday showed exports, which account for more than 60 percent of Thailand's GDP, fell 7.1 percent in September from a year earlier. And factory output slid 2.9 percent year-on-year in September, much worse than the expectation in a Reuters poll for a marginal 0.05 percent slip. The Industry Ministry said the fall in output was led by weakness in car production, frozen canned seafood, beer and electrical appliances.
At the start of this year, Thailand was hopeful that a stronger global recovery would boost its pivotal exports. The central bank forecast exports would rise 9 percent this year. In July, it cut that to 4 percent and then, on Friday, sliced it to just 1 percent. Thailand is a regional hub and export base for top global car makers and is the world's number two producer of computer hard disk drives.
The Industry Ministry reported a little bit of good news, in that factory capacity utilisation rose slightly in September to 64.0 percent from 63.5 percent the previous month. But the picture for the full-year was discouraging. "Output should be negative this year because of last year's high base and falling demand for goods from trading partners," Somchai Harnhirun, head of the ministry's Office of Industrial Economics, said.
Earlier, the ministry expected output to expand 0.5-1.0 percent this year. For the first nine months, it fell 1.87 percent from a year earlier. The auto sector's capacity utilisation was 94 percent in September, up from 90.8 percent in August, and against 110 percent in the first quarter, following fading deliveries of cars from a government scheme subsidising first-time buyers. To get the subsidy, citizens had to order vehicles by the end of 2012. Hard disk drives' capital utilisation was 60.6 percent in September, little changed from August's 59.7 percent.
Despite recent weak economic data, Rahul Bajoria of Barclays said the central bank was not expected to move soon to change the benchmark rate. "We expect policy rates to remain stable well into 2014, especially given the BOT's projections showing stable growth conditions in the second half of 2013." "Even as the economy recovers from a recession, we see very limited risk of the BOT tightening policy, as it will want to ensure that the recovery is entrenched."
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