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Export group sees dark outlook

Jul 01. 2015
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By Erich Parpart,
Likasit Pongpa

The THAI National Shippers' Council (TNSC) now believes that merchandise exports are heading for a contraction of at least 2 per cent this year and possibly even more, by up to 3.5 per cent, if existing and unpredictable detrimental factors begin to dark

The looming negative factors include a further decline of China’s economy, a default by Greece, which could weigh on the European Union’s economy, uncertainty in the recovery of the United States economy, another outbreak of Middle East Respiratory Syndrome (MERS) in a major trading partner country and the further effect of the drought on the productivity of the agriculture sector.

The TNSC had been predicting zero growth this year following a decline of about 4 per cent in May and an expected 4 per cent in June.

The Commerce Ministry has reported that exports in May contracted for the fifth straight month by 5.0 per cent to US$18.42 billion (Bt622 billion), the sharpest year-on-year decline since February.

Exports in the first five months of the year were behind 4.2 per cent at $88.69 billion, while imports declined 9.4 per cent to $85.37 billion, leaving a trade surplus of $3.32 billion.

"The contractions reflect the poor performance that was mainly caused by the global market slowdown.

"If our prediction is correct, than the export sector is going to be short by around 4 per cent in the first half of this year," Nopporn Thepsithar, chairman of the council, said yesterday. "There are only negative factors that remain to be seen and there is no positive factor to look forward to so we expect flat growth in the second half of the year, which means that the best case scenario that we are facing right now is a contraction of 2 per cent," he added.

The TNSC revealed that exports in the first five months to Asean, Japan, South Korea, the EU, Middle East, Africa, South America, India and Commonwealth of Independent States were down by 7.2 per cent, 4.1 per cent, 15.9 per cent, 13.7 per cent, 26.9 per cent, 21.1 per cent, 2.9 per cent, 9.9 per cent and 40.7 per cent.

The agricultural and petrochemical industries are facing difficulties from the drought crisis and oil price fluctuations. The two industries contribute 15 per cent and 10 per cent of the Kingdom’s exports. Also, the textile and machinery industries are in a downturn.

"The contractions in the agricultural, energy and petrochemical industries that are expected to continue until the end of the year will already contribute to the 2-per-cent contraction that we have predicted, so the contraction could be worse if other industries are in the negative zone by the end of the year as well," he said.

The Bank of Thailand has noted that the economic recovery "continued to be slow and fragile" in May as merchandise exports remained sluggish and private spending softened in line with declining merchandise imports.

Roong Mallikamas, senior director of the central bank’s macroeconomic and monetary policy department, said the risks to the economy include a further slowdown in China and worse-than-expected effect of the drought on farmers’ purchasing power.

However, the Greek tragedy should be absorbed by the market and the EU. "The slowdown in domestic and external demand means that the private sector will continue to be reluctant to invest, as capacity utilisation is still around 56-58 per cent on average," she added.

Meanwhile, the Office of Industrial Economics (OIE) yesterday announced that Thailand’s Manufacturing Production Index (MPI) in May dropped 7.6 per cent year-on-year to 158.85 following falls in production of hard-disk drives (HDD), automobiles, televisions, beer and accessories in light of low demand and declining domestic purchasing power.

However, May’s MPI rose 9.4 per cent from the previous month. May’s utilisation rate declined to 56.91 per cent from 61.57 per cent in the same month of last year, but rose from 52.68 per cent from the prior month of this year, Udom Wongviwatchai, director-general at the OIE, said.

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