Manufacturing drives Thai growth

The economy has fully recovered from the supply disruption related to Japan's earthquake, but has begun to show impacts from declining consumer demand in the United States and Europe, says the Bank of Thailand.
 

Mathee Supapongse, the senior director for the central bank's Domestic Economy Department, said industrial and farm manufacturing had recovered from a soft patch in July, led by automobiles and hard disk drives on improving demand from China. Overall production rose 7 percent year-on-year in August, compared to a 1 percent year-on-year contraction in July.
 

But manufacturing of cheap textiles and garments suffered a steady decrease in orders reflecting weakening demand from the US and Europe. The production of hard disk drives, Thailand's largest technological product export, could be affected by consumer changes in favor of tablet PCs, he said.
 

Mr. Mathee said the domestic economy was bolstered by healthy demand from consumers and businesses. Exports also held up, reflecting steady external demand in August.

The economy grew 2.9 percent in the first half of the year from the same period last year, 3.2 percent year-on-year in the first quarter and 2.6 percent in the second. The Fiscal Policy Office last week cut its growth forecast by half a percentage point to 4 percent this year, with 2012 growth forecast at 4.5 percent.

Mr. Mathee said the central bank had not found exporters to be concerned about future orders, meaning they are not worried about a protracted downturn in the US and Europe.
In any case, the market widely expects the central bank to cut its growth forecast for this year from 4 percent, as well as 2012's forecast from 4.1%.
The central bank has found that businesses' inflation expectations over the next year have eased to 3.8 percent in August from 4 percent in July, but pressure on consumer prices remains high, he said.

Exports totaled US$20 billion in August, up 28 percent year-on-year, versus $20.2 billion of import, 46 percent year-on-year growth. Imports boomed due to petroleum and gold orders.

Farm income rebounded to 13 percent year-on-year growth in August from a 3% year-on-year contraction in July. The severe floods in many provinces will affect consumer prices temporarily.