Economic Highlights (Thailand) - 29/04/2014

Manufacturing Production Fell At A Sharper Pace In March

¨      Manufacturing production in Thailand slipped further into a contraction of 10.4% y-o-y in March, from a revised -4.7% in February and compared with -5.6% in January. In addition, March’s manufacturing output marked the 12^th consecutive month of contraction and it came in below the median consensus expectation.

¨      The production of electrical & electronics (E&E) products registered a sharp drop of in March, on the back of a sharper decline in the production of hard disk drives and electrical appliances, while output of other electronic devices declined at a quicker pace during the month. Meanwhile, the production of motor vehicles registered a larger drop in March amid the base effects of strong vehicle production and deliveries that extended into 1Q of last year even after the expiry of the first car Tax Rebate Scheme in end-2012.

¨      Looking ahead, downside risks to growth have increased following the recent constitutional court ruling that voided the inconclusive 2 February elections, erasing hopes for an early end to the current political impasse. Nonetheless, the decline in manufacturing production has stabilised in 1Q 2014, which lends support to our real GDP forecast of 0.2% in 1Q 2014, compared with +0.6% in the 4Q of last year.

¨      On a more positive note, the world economy is on track to chart a stronger growth in 2014, broadly supported by the advanced economies. This will likely lift Thailand’s manufactured exports during the year.

¨      With no clear solutions to its political crisis within sight in the near term, economic activities in Thailand will likely remain lacklustre in 2014. As a result, we expect GDP growth to weaken to 1.9% in 2014, from +2.9% in 2013, as we expect domestic demand to remain weak given the sluggish state of consumer and business confidence and the lack of catalysts in driving economic growth.

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