News Room - Business/Economics

Posted on 02 Nov 2009

Thailand manufacturing production unexpectedly climbs

Thailand's industrial production unexpectedly rose for the first time in 11 months as electronics and automotive companies received more orders, adding to signs the nation's economic recovery is strengthening.

 

Manufacturing output increased 0.4 percent from a year earlier after a revised 10.1 percent decline in August, Suchart Sakkankosone, a Bank of Thailand senior director, said in Bangkok today. The median estimate of 13 economists in a Bloomberg News survey was for a 4.3 percent contraction.

 

Industrial production has improved around the world as the global recession eases, prompting companies including Thai Union Frozen Products Pcl to forecast better sales and profit. Thailand's central bank yesterday raised its 2009 economic forecast after a decline in exports eased and confidence rose.

 

"Firms are increasing production to catch up with final demand outside and inside of Thailand," said Edward Teather, a Singapore-based economist at UBS AG. "We are on a pretty strong trend in the very near future."

 

Gross domestic product may shrink 2.5 percent to 3.5 percent this year, less than an earlier forecast for a contraction of 3 percent to 4.5 percent, the Bank of Thailand said yesterday. It expects the economy to start expanding this quarter from a year earlier.

 

Exports Fall

 

Southeast Asia's second-largest economy probably shrank 3.1 percent to 3.3 percent last quarter, Suchart said today. The central bank predicted a contraction of 3 percent to 3.5 percent from a year earlier yesterday.

 

"Manufacturing should be on a positive trend based on the strong production in export-oriented sectors, especially electronics products," Suchart told reporters in Bangkok. "Improving economies in our trading partners should support exports and boost production."

 

While the monthly indicators may be "volatile" at the start of the economic recovery, they are "on an uptrend in the long-term," the director said. Electronics output is back to about the same level as before the global financial crisis and companies have orders at least until the fourth quarter this year, he said.

 

The Bank of Thailand kept its benchmark interest rate unchanged at 1.25 percent for a fourth straight meeting last week, after cutting its key interest rate by a total of 2.5 percentage points from December to April.

 

'Appropriate' Rates

 

The interest rate is at an "appropriate level" to support economic recovery, Bank of Thailand deputy Governor Bandid Nijathaworn said today.

 

Exports, which are equivalent to about 60 percent of Thailand's economy, dropped 8.3 percent to $14.7 billion in September from a year earlier, the central bank said today. Shipments plunged 17.9 percent in August.

 

Thailand's imports fell 18.2 percent last month to $12.7 billion after 33.8 percent drop a month earlier. The trade surplus in September narrowed to $2.05 billion from $2.27 billion a month earlier.

 

An index of business sentiment rose to 49 last month, compared with 46.1 in August, the central bank said. The reading hasn't exceeded 50, a level that suggests the mood is improving, since April 2004.

 

The current-account surplus narrowed to $1.26 billion in September from $1.92 billion a month earlier. The measure comprizes the difference between exports and imports of goods, services, investment income and remittances. Trade makes up about 70 percent of the current account, and tourism contributes most of the service industry's 30 percent component.

 

Tourist arrivals rose 17.4 percent from a year earlier to 1.2 million last month.