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Thai economy looking weak despite trade surplus

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November 1, 2008

Thai economy looking weak despite trade surplus
Growth in Thai exports picked up in September, producing a trade surplus after two months of deficit, but analysts expect trade and the economy in general to come under pressure because of a global downturn, reported Reuters.

Industrial output data on Friday signalled a clear slowdown, with growth in manufacturing output at a 15-month low of 4.6 percent in September from a year earlier. That compares with 7.6 percent in August and the 7.3 percent predicted by analysts.

"The overall figures were worse than expectations, particularly the manufacturing index, which suggested the economy had slowed down sharply," economist Nuchjarin Panarode of Capital Nomura Securities said.

Exports in September, boosted by healthy electrical appliance and car sales, rose 19.5 percent from a year earlier, up from a 15.5 percent rise in August but far below July's 43.9 percent, the Bank of Thailand said.

The current account, weighed down by a weak service sector as political unrest and months of anti-government protests turned tourists away, showed a higher-than-expected $703 million deficit in September, the third monthly shortfall in a row.

Analysts had expected a $227 million deficit.

"While September is a typically weak month for net services and transfers, we had been expecting a pullback beyond the typical cyclical shortfall on the back of political tensions weighing on Thailand's tourism industry," economist Carl Rajoo of Forecast Pte in Singapore said.

"It is clear that the significant slowing in manufacturing orders has begun to come into full swing and we see this dip as a sign of things to come," Rajoo added.

The September data fuelled market expectations of a rate cut by the central bank at its next policy review on December 3, if not earlier.

"We expect the central bank to cut rates at its meeting in December, but they may move before that if inflation data and consumer confidence due in November fell sharply," said Nuchjarin of Capital Nomura.

Bank of Thailand Deputy Governor Atchana Waiquamdee fuelled that speculation on Friday in comments on inflation.

"It's not a risk," she told reporters. "Oil prices have come down while the economy has also slowed."

Imports rose 38.6 percent in September from a year earlier to $15.52 billion after a 26.9 percent rise in August and a record 53.4 percent rise to $17.55 billion in July.

That gave a trade surplus of $142 million, a turnaround from a $675 million deficit in August.

Due to ballooning energy import costs early this year and an expected slackening in exports to major markets, the central bank in mid-October forecast a small $1.0-3.0 billion trade surplus for this year, against a $12 billion surplus in 2007.

The current account surplus was forecast to narrow to $1.0-4.0 billion in 2008 from a $14 billion surplus in 2007.

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