Thaksin and Pheu Thai Party face constitutional showdown

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SURPRISE SHOW

Optimism as economy ably weathers turmoil

By THE NATION

Published on July 26, 2010

Thailand has emerged almost unscathed from the political crisis in the first half of this year, with the Bank of Thailand revising its economic growth projection close to the International Monetary Fund's 7-8 per cent estimate.

With a strong export rebound and a surge in investment, the Bank of Thailand has revised its projection to 6.5 per cent to 7.5 per cent, according to central bank Assistant Governor Paiboon Kittisrikangwan. This represents a sharp revision from the 4.3-per-cent to 5.8-per-cent projection made in April by the central bank.

Anoop Singh, the director of IMF's Asia-Pacific Department, said the strong recovery of the Thai economy reflected the resilience of the country in spite of the global crisis and the political crisis in the first half of the year.

He attributed the strong recovery to the Thai authorities' timely response, both in its fiscal stimulus and an accommodative monetary policy, which has helped keep the growth humming.

After the political crisis ended in May, tourism has started to recover while the export sector continues to provide the underpinning growth. Investment is also about to make a comeback.

"Private investment will pick up as rising demand for exports encourages companies to expand capacity," Paiboon said.

"Capacity utilisation in many industries is nearly full now." In June, exports outperformed the already strong May figure, which provided a strong lift to growth in the second quarter.

"Exports in the second quarter posted a seasonally adjusted gain of 3.9 per cent quarter on quarter that implied an annualised rate of 16.4 per cent. Imports on the other hand were also better than anticipated although on a seasonally adjusted basis, it dipped by 0.1 per cent month on month," said a report of Citi's Emerging Market Daily: Asia Edition, published last week.

Exports to Asean grew 51.2 per cent year on year, compared with 37.9 per cent for the US, 49.3 per cent for Japan and 36.9 per cent for Europe.

This does not hint at the likelihood of an upcoming downturn in external demand. Shipments to key Asian markets also surged, with export growth of 61 per cent to Hong Kong, 43.8 per cent to Taiwan and 59 per cent to Korea.

"The export surprise and the hefty trade surplus of US$2.3 billion [bt74 billion] in June ought to support market sentiment in favour of the baht although BOT intervention may stand in the way of baht gains," the Citi report said.

DBS Group Research in its report published on Thursday also said the customs exports and trade balance in June were far stronger than expected.

"The trade balance registered a surplus of $2.3 billion, twice as much as expected. In terms of the breakdown of exports by country, growth in exports to China moderated (but continued to grow) while that to the rest of the world accelerated," the report said.

The Commerce Ministry upgraded its export forecast to 19 per cent from 17 per cent earlier, the second time in a month.

"While export growth momentum is defying our expectation for the path to normalise by now, it is important to note that exports can be very volatile and even more so if temporary factors such as inventory rebuilding are in play," DBS Group Research said.

"However, even if part of the rise in exports owes to temporary effects, it is clear that the momentum in underlying demand is strong. Indeed, the risks to our above-consensus export forecast of 26 per cent for 2010 may now lie to the upside.

"In the same vein, risks to the GDP growth forecast of 7 per cent for 2010, which were more balanced hitherto, are also moving northwards."

-- The Nation 2010-07-26

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Passenger arrivals through the airport are up. Exports are up. Somewhere, someone will be complaining. Oh yes, the Thai baht is strong.