Thai PM urged to seek extradition of Tak Bai Massacre suspect from Japan at ASEAN Summits

[webfact]

ANALYSIS

July trade figure indicate slower 2nd-half growth

By ACHARA DEBOONME

THE NATION

Thailand's trade deficit in July serves as a reminder that though the engines of economic growth are running, they could run at a slower pace in the second half of this year.

The National Economic and Social Development Board today will reveal the official growth figure for the second quarter. After the 12-per-cent year-on-year growth in the first quarter, most agencies are bullish that second-quarter growth will be 7-8 per cent, pushing first-half growth to 10 per cent - the highest in years.

But while the annual forecasts of many agencies range from 3.5-7.6 per cent for the entire year, the July figure is the first indication that second-half performance will be less active. HSBC Global, the Bank of Thailand, and the Thailand Research Development Institute were the most bullish, forecasting growth of more than 7 per cent.

Finance Minister Korn Chatikavanij, while stating on Friday that second-quarter growth in gross domestic product could be 7 per cent or more, admitted that there were more challenges in the second half and this was reflected by the slowing of export growth in July - which resulted in the highest monthly trade deficit in two years at more than US$900 million (Bt28.35 billion).

Siam Commercial Bank's Economic Intelligence Centre noted that nearly all export categories showed a drop but the trade deficit was not as worrying as it seemed, given that gold imports accounted for $1.7 billion. Without the gold imports, Thailand would have enjoyed a trade surplus of $700 million. Still, the centre said the export growth rate would slow down. Export growth excluding gold dropped to 33.7 per cent in the second quarter from 39.5 per cent in the first quarter. In July, the growth rate dropped to 21.9 per cent.

SCB economist Pornthep Jubandhu noted that with the slowing exports, the other two growth engines - domestic consumption and investment - would not compensate for the falling export revenue.

"As the export engine is slowing down in the second half, this convinced us that GDP growth this year would be only 3-4 per cent. This indicates a tough time in the second half," he said.

The export sector now contributes 70 per cent of GDP.

However, Pornthep anticipated that Thailand would enjoy further trade surpluses that would buoy the dollar-baht exchange rate. Like many houses, SCB expects the baht to hit 31 per US dollar this year and probably surpass the psychological level of 30 next year.

Despite the deficit in July, Thailand's aggregate trade surplus amounted to $5.4 billion in the first seven months.

The Monetary Policy Committee, at its meeting on Wednesday, is expected to pay attention to the baht's appreciation. While it is expected to raise the policy rate by 25 basis points at the meeting to rein in inflation, the higher rate will only push up the baht's value.

According to the Bank of Thailand, the country witnessed net capital inflows of $2.17 billion in June, and more is anticipated to cash in on higher interest rates.

Last week, the Stock Exchange of Thailand Index gained 3.7 per cent from the previous week with robust market turnover, driven by continued foreign fund inflows.

Trinity Securities expects fund to continue flowing into Thailand to benefit from the baht's appreciation.

"The baht strengthened 2.36 per cent in this month when compared with the US dollar. However, expectation of an interest-rate rise on August 25 will prompt the baht to appreciate further in our view," said the house's executive director Vajiralux Sanglerdsillapachai.

GDP forecasts

Agency/2010 /2011

BOT/6.5-7.5 (revised from 4.3-5.8)/35

NESDB/3.5-4.5/na

Finance Ministry/3.5-4.5/na

DBS /8/na

HSBC 7.6/5.3

Siam Commercial Bank/34/na

Trinity Securities/7/na

TDRI/6.4-7.1/3.5-7.1

-- The Nation 2010-08-23