News Room - Business/Economics

Posted on 20 Feb 2009

Economy may shrink in Q1 (Thailand)

 

Contraction of 3-3.5% possible as fears grow over January trade

 

Thailand's exports could have fallen by more than 20 per cent in January, raising the possibility that economic growth will turn negative in the current quarter, Finance Minister Korn Chatikavanij said yesterday.

 

"This is in line with global economic conditions," said Korn, adding that the Commerce Ministry would release the official export figure for January tomorrow.

 

Korn said first-quarter economic growth might contract 3-3.5 per cent, as projected by the Fiscal Policy Office. He added that this had made it necessary for the government to prepare Bt116 billion in additional mid-year supplementary spending to cushion the downturn.

 

Thailand is joining other export-led countries in Asia that are witnessing a collapse in their exports. Since exports account for more than 60 per cent of Thailand's gross domestic product, a collapse in exports would push economic growth into negative territory.

 

Earlier, the Post Today newspaper quoted a source who said Thai exports for last month might tumble 25 per cent year on year.

 

"We see that as being plausible, as bad export figures released from various East Asian countries for January are a precursor for bad export figures for Thailand for that month," SCBS Investment Research said in report issued on Tuesday entitled "Prepare for Bad Export Figures for Thailand in January 2009".

 

Other East Asian countries are reeling under a slump in their exports, due to a collapse in demand from developed countries. South Korean exports fell 32.8 per cent year on year last month, worse than the 17.4-per-cent fall in December.

 

Taiwan's exports shrank 44.1 per cent year on year in January, against a 41.9-per-cent fall the previous month.

 

A Bloomberg consensus showed electronics exports from Singapore fell as much as 35 per cent year on year in January, worsening from a 25.4-per-cent fall the previous month.

 

China's exports slipped 17.5 per cent year on year, sharply worse than the 2.9-per-cent drop the month before.

 

SCBS Investment Research said East Asian exports tracked well with each other.

 

"Correlation between growth of South Korean exports and growth of Thai exports is as high as 80 per cent," it said.

 

It expects export growth within East Asia to improve this month. This is because bad export figures in January were partly caused by the shift this year of the long Lunar New Year holidays to January, from February last year.

 

SCBS Investment Research said Thai economic growth was likely to remain in negative territory this quarter, while it predicted full-year growth would be flat at 0.9 per cent.

 

Prime Minister Abhisit Vejjajiva said the public sector would invest Bt2 trillion over the medium and long term to boost economic growth.

 

The public investment programme, handled by Deputy Prime Minister Korbsak Sabhavasu, will involve joint public and private investment.

 

Commerce Minister Porntiva Nakasai yesterday accepted that the Kingdom's exports would be in negative territory this year but said she had not confirmed whether the contraction would reach 25 per cent.

 

The ministry will hold a press conference tomorrow on the January export figure.

 

"We accept that negative [export] growth is a serious signal for the country's economy. However, the ministry has launched many stimulus measures to reduce negative growth in the first half of the year," she said.

 

Porntiva added that if exports showed minus growth in both the first and second quarters, it would directly affect first-half economic performance.

 

The Commerce Ministry predicts exports will grow by 0-3 per cent this year.