Cut in 2013 export forecast seen

The Bank of Thailand (BOT) expects to revise downward its 2013 export-growth forecast after shipments contracted in May, while TMB Bank has slashed its forecast for 2013 export growth to 3.5 per cent on the back of a likely slow economic recovery in the latter half of this year. 

Mathee Supapongse, senior director of the BOT’s Macroeconomic and Monetary Policy Department, said that export figures came out lower than forecast, so it was possible the central bank would discuss a downward revision of full-year export figures at the Monetary Policy Committee’s July 10 meeting. Earlier, the central bank signalled the possibility that a downward revision of its economic growth estimate for 2013 from 5.1 per cent would be made at the same meeting. 

Thai exports contracted 5.25 per cent in May year-on-year, while growing 1.86 per cent on average for the first five months of this year, according to the Commerce Ministry.

In April, the central bank projected export growth of 7.5 per cent for the whole of 2013. Mathee said the BOT expected Thai exports to recover slowly in the second half of this year, explaining that China’s economic slowdown was taken into account in its economic forecast, while adding that higher-than-expected US economic figures may give some support to Thai exports.

In response to concerns about the impact of the baht’s depreciation on exports, Mathee said it was difficult to gauge the impacts in the short term, as some trading prices are fixed. Meanwhile, Porametee Vimolsiri, deputy secretary-general of the National Economic and Social Development Board (NESDB), said the agency’s projection for this year’s economic growth was set to be lower than 5.0 per cent, with a likely lower end of 4.2-5.2 per cent, after weaker-than-expected performance in the second quarter. 

“Currency will be a big issue for this year. We have to keep an eye on the impacts on Thai export revenue,” Porametee said. The government has set a target of 5-per-cent average economic growth per annum for 15 years as part of its strategy to push Thailand to become a high-income country.

Benjarong Suwankiri, head of TMB Analytics, the economic analysis unit of TMB Bank, said May’s 5.25-per-cent export contraction was unexpected, signalling a clear slowdown in the export sector. 

 

No sign of robust recovery 

“We’ve adjusted our view of exports. The revised [export growth] figure is 3.5 per cent, compared to the previous estimate of 7 per cent,” he said. Benjarong said there was no sign of a robust economic recovery in Thailand’s export markets, including Europe, China and Japan, through the second half of this year, hence the halving of the estimate.Meanwhile, experts from the Bank of Ayudhya pointed out that the global economy is reaching a turning point, with the US on the road to economic recovery while signs of a slowdown appear in emerging markets. They say that the Thai economy will not be able to avoid the effects.

Roongsak Satutum, senior vice president at BAY’s Research Department, said markets are concerned that the winding down of quantitative easing (QE) in the US will affect financial markets and capital flows in emerging countries, including Thailand, by weakening asset prices. The QE programme has been sustaining the economies of emerging markets through capital inflows, he said.

The emerging markets are showing signs of a significant slowdown, and China is also taking steps to cool its overheating economy. As a result, the Thai economy is facing volatility. BAY’s Research Department has revised down its growth forecast for the Thai economy to 4-4.5 per cent from 4.8-5.3 per cent.

Roongsak said export growth this year should not be more than 3-5 per cent due to the emerging markets’ slowing growth and the risk of a Chinese “hard landing”.

The rapid reversal of foreign fund flows is a challenge for the BOT’s monetary-policy planning. The bank expects the policy rate will be maintained at 2.5 per cent throughout this year, Roongsak said.

A slowdown of domestic consumption is another factor putting pressure on Thailand’s GDP, because purchasing power was distorted through the first-car and first-home schemes. 

The unusual spending last year as a result of these schemes caused high household debt this year, while the price revision in the price-pledging scheme will also pull down the purchasing power of people upcountry, the BAY researcher said.

Several Asean economies’ outlooks, including Thailand’s, have been downgraded by Goldman Sachs Group Inc. 

Somchai Sujjapongse, director-general of the Fiscal Policy Office (FPO), said his office this month revised down its growth forecast for 2013 to 4.5 per cent from an earlier projection of 4.8 per cent. Its estimated range for this year’s growth is between 4 and 5 per cent. 

The FPO cited slow economic recoveries in 14 of Thailand’s trading partners, particularly China, Europe, the United States and Japan, as well as slowdowns in private consumption and private investment. 

The FPO expects the second quarter of 2013 to see growth of 1.7 per cent from the previous quarter.