Japanese Tsunami 2011

Thailand Aug factory output is seen down for third straight month

PUBLISHED : Friday, 28 September, 2012, 10:20am
UPDATED : Friday, 28 September, 2012, 10:23am


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Factory output in Thailand may have fallen for a third straight month in August as faltering global demand drags down exports, even though industry continues to restore more capacity after devastating floods late last year.

Production in August probably dropped 7.0 per cent from a year earlier, according to the median forecast of 10 economists polled by Reuters.

The Industry Ministry has predicted a fall of 4-6 per cent in factory output in August from a year earlier.

The floods forced seven big industrial estates to close in October last year. Cars and electronics firms -- many of them big exporters -- were the worst hit. Thailand is a regional hub and export base for the world’s car makers and producers of hard disk drives.

Most of the affected firms have resumed production, with the auto sector now fully operational, although some are still closed, the Industry Ministry said.

“Manufacturing indices and exports have rebounded as supply-side disruptions fade. It is demand that will continue to constrain manufacturing output in the coming months,” said Eugene Leow, an economist at DBS Bank in Singapore.

“Even if domestic demand remains strong, external headwinds still loom.”

Export-reliant countries in Asia are facing steady declines in shipments as the global slowdown saps demand.

The Thai central bank said on Wednesday it planned to cut slightly its scaled-down export growth forecast of 7 per cent for this year, compared with a revised 13.1 per cent rise last year. Earlier this month, the Finance Ministry cut its export growth forecast to just 4.5 per cent from 12.8 per cent.

Customs data on Tuesday showed exports fell for a third month, declining a bigger-than-expected 6.95 per cent in August from a year earlier. Exports have been weak this year due to Europe’s debt crisis and weakness in the manufacturing sector earlier this year due to the floods.

Industrial goods account for about 65 per cent of Thailand’s total exports, which are each year equal to more than 60 per cent of Southeast Asia’s second-largest economy.

The finance ministry this week trimmed its economic growth forecast to 5.5 per cent from 5.7 per cent.

In August, the National Economic and Social Development Board, which compiles gross domestic product (GDP) data, cut its 2012 export growth forecast to 7.3 per cent from 15.1 per cent. But it changed its GDP growth estimate only slightly to 5.5-6.0 per cent from 5.5-6.5 per cent.

The Bank of Thailand (BOT) left its benchmark interest rate unchanged at 3.0 per cent on September 5 for a fifth straight meeting, citing robust domestic demand. It made two quarter-point cuts in November and January to help business cope with the disaster.

The central bank has said it is ready to adjust rates if needed. However, BOT Governor Prasarn Trairatvorakul said this week that cutting rates to support growth could undermine financial stability as credit growth was already strong.

Most economists expect no change in the policy rate for the rest of 2012, barring an economic slump, although some think a rate cut is possible. The BOT next reviews policy on October 17.