Thai economic data throws up a mixed bag as exports dip in March. However, the economy managed to grow by 1% in the opening quarter. In addition, concerns linger over an 18-month-long  manufacturing decline with global trade impacted by geopolitical divisions.

The latest data released for the Thai economy on Monday and Tuesday shows things are down but not out. Firstly, the economy is said to have grown in the first quarter by 1%. Certainly, this is a turnaround from a 0.6% decline the quarter before. However, the figure must be confirmed in mid-May. Exports were down by 10.9% in March, not as big a problem as the headline suggests, but the worrying trend is weaknesses in China, Japan and Asia. Certainly, the most disturbing aspect of the data is a drop in Thailand’s Manufacturing Production Index (MPI) for the 18th consecutive month. In summary, the economy may recover, but Thailand’s manufacturing base is being eroded. There remain troubling long-term problems and even new challenges that both the government and central bank must address.

Director of Trade Policy and Strategy Office at the Ministry of Commerce Poonpong Naiyanapakorn briefed reporters on Monday afternoon. He explained that exports seen in March, although down by 10.9%, were higher than the average for the past five years. Nevertheless, Thailand has suffered 18 consecutive months of a Manufacturing Production Index (MPI) decline. Meanwhile, the Bank of Thailand revealed a 1% growth in the economy in the first three months. It comes despite concern over capital outflows and bank interest rate policy.

Thailand’s Ministry of Commerce mandarins were jolted on Monday when it was revealed that exports fell again for the first time in eight months.

The kingdom’s output to foreign countries fell by 10.9%, with sales particularly down to both China and Japan.

Indeed, one of the bright spots in the story was a 2.5% rise in sales to the United States. Meanwhile, exports to China fell by 9.3%. Significantly, output to Japan was sharply down by 19.3%.

Exports to Europe were down marginally by 0.1%. The star performer in March was the Australian market with a rise of 13.5%.

Ministry of Commerce official assured reporters that the March figures were not so bad and that the first quarter exports were stable and poised for growth

Certainly, Thailand appeared to lose steam in secondary export markets. These included South America, with lower figures also seen in Southeast Asia and the Middle East.

At the same time, Mr Poonpong Naiyanapakorn, Director of the Trade Policy and Strategy Office, appeared confident that exports this year will rise by approximately 1-2%.

The senior official also explained that combined exports for the first quarter were only off by 0.2%. Indeed, the $24.96 billion in product exports for March 2024 was above the five-year average for the kingdom.

In short, the key reason for the drop in exports is last year’s high base. Back in 2023, due to agricultural demand, Thailand managed to ship $28.4 billion.

Economy is delicately balanced with underlying structural problems combined with rising geopolitical problems that are certainly impacting GDP growth

Nonetheless, there is apprehension about the kingdom’s economy being delicately balanced. In short, long-term structural problems combined with drives in agricultural exports and foreign tourism income.

The data certainly highlights a structural problem with the manufacturing economy. At this time the stunted growth Thailand has seen in the last decade more particularly the last five, creates a sense of urgency. 

Simultaneously, the kingdom has disappeared from the table of regional investment targets in Asia. Similarly, geopolitical tensions and the rising prospect of war in Asia are certainly being felt in trade, investment and production decisions.

Thailand is losing out due to its continuing association with China in addition to its structural problems. In the meantime, the Thai government refuses to accept the changed environment from two decades ago. 

Of course, other Asian countries are in the same boat but not as disadvantaged as Thailand.

Fear for the economy after a shock decline in the fourth quarter of 2023. Bank of Thailand’s 1% growth projection for the start of  2024 will be welcome

Economic planners are especially sensitive after it was revealed that Thailand’s economy declined in the last quarter of 2023.

In short, this brought the problem home starkly to them. The National Economic and Social Development Council (NESDC), confirmed GDP declined by 0.6% in the same period.

Economy is unlikely to grow in the first quarter as Thai manufacturing crumbles. Hard choices ahead

Indeed, the top state economic agency must still confirm the GDP performance for the first quarter of 2024. This is expected around mid-May. 

In the meantime, the Bank of Thailand has come forward with a figure. It suggests a growth rate of 1% in the opening quarter of the year.

Fears for the baht with capital outflows. This is a key reason for the central bank’s reticence to ease monetary policy and lower the base lending rate

The central bank, meanwhile, is concerned about capital outflows and the prospects for the baht. The Thai currency is currently at a six-month low. On Tuesday, it was valued at ฿37.15 to the greenback.

In the meantime, Commerce Ministry official Mr Poonpong expressed confidence that exports will perform better in the second quarter.

The sharpest falls in March were in cassava exports at 16.7% and vegetables and fruit, off by 19.3%. At the same time, industrial products were off by 12.3%, chemicals and equipment by 12.3%, and computers by 11.8%.

The top official said that fruit and vegetable exports will rise afterwards, together with processed agricultural products. He insists that the kingdom’s exports will rise between 1 and 2% in 2024.

Within the figures, there were indeed encouraging signs. 

60% of first-quarter imports are related to capital goods and raw materials. However, oil imports were also up at 19% of the value. This is a concern and may feed into inflationary pressures later this year.

Shipping executive sees stability in exports in the first quarter. However, the 18th Manufacturing Production Index (MPI) falls in a row is disturbing news

Chaichan Charoensuk of the Thai National Shippers’ Council was also cautiously confident. He pointed to stable exports in the first quarter. He was also positive about the lower-priced baht, which has passed the ฿37 barrier to the dollar. 

Based on first-quarter exports of $71 billion, he feels Thailand will certainly come out ahead for the year.

Undoubtedly, the country’s manufacturing sector is still in a state of crisis. The Office of Industrial Economics (OIE) revealed that the Manufacturing Production Index (MPI) fell again in March 2014. 

It was down 5.13% to 104.06. Significantly, this is the 18th month in a row of a decline.

Sales of EV cars fell in Thailand in February and March 2024, challenging the kingdom’s vision as a green hub.

This, in conjunction with the lower exports to China and Japan, speaks of a persistent problem with Thailand’s underlying economy. In short, its eroding manufacturing base.

Key problem within the auto manufacturing industry

These figures were presented by Ms Worawan Chittarun, Director of the Office of Industrial Economics (OIE) on Monday. In addition, she highlighted an eighth consecutive month when automotive production has fallen.

This speaks to the crisis in the auto sector. Constrained not only by a lack of credit, and reduced domestic demand, the industry is also facing a crisis over the switch to EV vehicles.

The Bank of Thailand itself appeared happy to see any return of growth to the economy.

The provisional figure of growth of 1% must still be confirmed in mid-May by the country’s top economic agency, the National Economic and Social Development Council (NESDC).

This news came on Monday as the Ministry of Finance revised down the projected growth figure for 2024. This is set at 2.4%. 

Meanwhile, the National Economic and Social Development Council (NESDC), the state planning agency, projects between 2.2% and 3.2%.

Central bank is still stymied when it comes to interest rates. The problem is inflationary pressures in both Thailand and particularly in the United States

At this time, the central bank remains concerned about interest rate policy. A reduction in interest rates might have a significant impact on the already pressurised baht.

However, the Bank of Thailand suggests the Digital Wallet, if it goes ahead at year-end, may boost growth.  Thai GDP growth may rebound to 3.3% this year. This is the controversial ฿500 billion giveaway scheme.

‘Despite this slowdown, the economy showed signs of improvement in the first quarter compared to the previous one,’ the Bank of Thailand said in a statement. ‘But overall growth was likely to remain low on a year-on-year basis.’

The central bank also noted a weakening of foreign tourism, although it did contribute to a $1.1 billion current account surplus in March 2024. However, this was down from ฿2 billion in February 2024.

The bank’s figures show exports down by 10.2% in March, while imports rose by 5.2%.

In the United States, inflationary pressures are persistently strong. This has caused the Federal Reserve to delay interest rate reductions. Voices are beginning to whisper that rate reductions may come later and less often than first thought.

A weakness seen in Asian economies and now the spectre of anxiety about the sustainability of Thailand’s critical foreign tourism industry is worrying

At the same time, weakness in the Chinese economy and lack of confidence across Asia are problematic for Thailand.

The kingdom appears to be facing new and more challenging problems. The latest is the question of over-tourism, with the heatwave in Thailand leading to water shortages. In short, it has raised questions over the sustainability of future growth of the industry.

 Of course, this is occurring at the same time as the kingdom is becoming more dependent on foreign tourism.

Simultaneously, the Ministry of Finance highlighted that the export figures were stable. Certainly, the Ministry of Commerce pointed to the increased imports seen in March, suggesting higher capital investment. This also coincided with an index showing improved confidence in the industrial sector.

The finance ministry also pointed to the boost to the economy as government budget disbursements are due to rise.

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