Thai economy struggles as manufacturing output declines

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thailand_factoryThailand’s economy continued to struggle in the second quarter of 2014 amid declining growth and manufacturing activity – underscoring concerns over the junta’s ability to revive consumption and investment hit hard by months of political instability.

Thailand’s Finance Ministry reported on July 30 that the economy shrank 0.3 per cent compared with the second quarter a year ago, although it grew 0.2 per cent from the first quarter.

“In June and the second quarter of this year, there continued to be signs of slowdown in the tourism sector and private spending,” said Kritsada Jinavijarana, director-general of the Finance Ministry’s Fiscal Policy Office.

The contraction led the ministry to lower its 2014 growth forecast to 2 per cent from an earlier projection of 2.6 per cent.

In the first quarter of 2014, Thailand’s economy declined by 0.6 per cent from a year earlier and 2.1 per cent from the quarter before. The country’s economy expanded 2.9 per cent in 2013.

The government’s economic planning agency, the National Economic and Social Development Board, which is in charge of economic data reports, is scheduled to release Thailand’s official gross domestic product report on August 18.

The Finance Ministry’s latest projection, however, was still rosier than the Bank of Thailand’s forecast of 1.5 per cent GDP growth for 2014 and the projections of many economists, including the bearish view of Moody’s Analytics that projects an economic contraction for Thailand in 2014.

“We’re expecting the Thai economy will contract by 0.4 per cent through 2014 and when you see prints, like the latest production numbers, they kind of indicate our forecast,” said Fred Gibson, an economist at Moody’s Analytics in Australia.

Official data showed that Thailand’s manufacturing production index (MPI) fell for the 15th consecutive month in June. The MPI, which measures the volume of production and indicates the direction of the country’s manufacturing sector, fell 6.6 per cent from a year earlier in June, steeper than a revised 4 per cent decline in May, the Office of Industrial Economics (OIE) at the Industry Ministry said.

Somchai Harnhirun, director general of the OIE, attributed the latest slide in the country’s MPI to weak domestic demand and a slowdown in spending, particularly for automobiles and the electrical appliances.

Thailand’s vehicle production was 26.1 per cent lower than a year earlier in June. Electrical-appliance manufacturing fell 8.73 per cent over the period, as consumers refrained from spending.

“I think the weakness in production has stemmed from the overall slowdown in the economy that the political crisis has brought about,” said Gibson of Moody’s Analytics, which projected a 3.2 per cent contraction for June’s MPI.

Thailand’s army chief Gen. Prayuth Chan-ocha successfully seized power from an elected government on May 22, ousting the government of former Prime Minister Yingluck Shinawatra. The coup followed months of political rallies, social unrest and street violence that have pushed the economy to the brink of a recession.

Since the coup, the junta, which last week adopted a provisional charter to pave the way for the establishment of an interim government, has been implementing various measures to shore up the economy – including the disbursement of overdue payments of about $2.7 billion to farmers who participated in the state rice-subsidy program, the approval of some $6.3 billion in investment incentives to more than 100 projects, as well as a $75 billion infrastructure-development plan.

“The only consolations are the improving investor sentiments (seen from recent net equity inflows into the Stock Exchange of Thailand), mild recovery in consumer confidence, and a relatively stable government body,” said Barnabas Gan, an economist at OCBC Bank in Singapore. “The lackluster first-half-year data, to us, will merely be water under the bridge as we focus on the recovery expected in the second half of 2014.”

Kritsada of the Finance Ministry’s Fiscal Policy Office said local spending and manufacturing activity could improve during the remainder of the year, when exports and government spending are expected to grow further because of stronger consumer and business confidence.

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Reading Time: 3 minutes

Thailand’s economy continued to struggle in the second quarter of 2014 amid declining growth and manufacturing activity – underscoring concerns over the junta’s ability to revive consumption and investment hit hard by months of political instability.

Reading Time: 3 minutes

thailand_factoryThailand’s economy continued to struggle in the second quarter of 2014 amid declining growth and manufacturing activity – underscoring concerns over the junta’s ability to revive consumption and investment hit hard by months of political instability.

Thailand’s Finance Ministry reported on July 30 that the economy shrank 0.3 per cent compared with the second quarter a year ago, although it grew 0.2 per cent from the first quarter.

“In June and the second quarter of this year, there continued to be signs of slowdown in the tourism sector and private spending,” said Kritsada Jinavijarana, director-general of the Finance Ministry’s Fiscal Policy Office.

The contraction led the ministry to lower its 2014 growth forecast to 2 per cent from an earlier projection of 2.6 per cent.

In the first quarter of 2014, Thailand’s economy declined by 0.6 per cent from a year earlier and 2.1 per cent from the quarter before. The country’s economy expanded 2.9 per cent in 2013.

The government’s economic planning agency, the National Economic and Social Development Board, which is in charge of economic data reports, is scheduled to release Thailand’s official gross domestic product report on August 18.

The Finance Ministry’s latest projection, however, was still rosier than the Bank of Thailand’s forecast of 1.5 per cent GDP growth for 2014 and the projections of many economists, including the bearish view of Moody’s Analytics that projects an economic contraction for Thailand in 2014.

“We’re expecting the Thai economy will contract by 0.4 per cent through 2014 and when you see prints, like the latest production numbers, they kind of indicate our forecast,” said Fred Gibson, an economist at Moody’s Analytics in Australia.

Official data showed that Thailand’s manufacturing production index (MPI) fell for the 15th consecutive month in June. The MPI, which measures the volume of production and indicates the direction of the country’s manufacturing sector, fell 6.6 per cent from a year earlier in June, steeper than a revised 4 per cent decline in May, the Office of Industrial Economics (OIE) at the Industry Ministry said.

Somchai Harnhirun, director general of the OIE, attributed the latest slide in the country’s MPI to weak domestic demand and a slowdown in spending, particularly for automobiles and the electrical appliances.

Thailand’s vehicle production was 26.1 per cent lower than a year earlier in June. Electrical-appliance manufacturing fell 8.73 per cent over the period, as consumers refrained from spending.

“I think the weakness in production has stemmed from the overall slowdown in the economy that the political crisis has brought about,” said Gibson of Moody’s Analytics, which projected a 3.2 per cent contraction for June’s MPI.

Thailand’s army chief Gen. Prayuth Chan-ocha successfully seized power from an elected government on May 22, ousting the government of former Prime Minister Yingluck Shinawatra. The coup followed months of political rallies, social unrest and street violence that have pushed the economy to the brink of a recession.

Since the coup, the junta, which last week adopted a provisional charter to pave the way for the establishment of an interim government, has been implementing various measures to shore up the economy – including the disbursement of overdue payments of about $2.7 billion to farmers who participated in the state rice-subsidy program, the approval of some $6.3 billion in investment incentives to more than 100 projects, as well as a $75 billion infrastructure-development plan.

“The only consolations are the improving investor sentiments (seen from recent net equity inflows into the Stock Exchange of Thailand), mild recovery in consumer confidence, and a relatively stable government body,” said Barnabas Gan, an economist at OCBC Bank in Singapore. “The lackluster first-half-year data, to us, will merely be water under the bridge as we focus on the recovery expected in the second half of 2014.”

Kritsada of the Finance Ministry’s Fiscal Policy Office said local spending and manufacturing activity could improve during the remainder of the year, when exports and government spending are expected to grow further because of stronger consumer and business confidence.

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