Thailand’s outward shipments contracted in June, as the exporting sector remained sluggish throughout the second quarter mainly due to subdued regional trade, according to the latest report by the Bank of Thailand.
Overall, the value of merchandise exports in June dropped by 8.9% from the same period last year, and contracted by 4.9% during the first half of the year compared to the same period last year.
The central bank said merchandise exports in June shrank mainly due to the slowdown in demand from China and countries in the association of Southeast Asian Nations (ASEAN).
“This led to a decline in business’ confidence, a contraction in manufacturing production, and flat private investment amid subdued domestic demand,” it added in an official release.
Specifically, the slowdown of the Chinese economy affected exports of chemical products and hard disk drives.
Moreover, global demand for electronic goods declined. Automotive exports (14% of total export values) continued to decrease particularly in the Middle East market as consumers waited to purchase new car models which were in the production process. Prices of several export goods continued to be low in line with crude oil prices that remained at a low level.
Correspondingly, subdued demand undermined private sector confidence and muted both domestic-oriented and export-oriented manufacturing industries. Some manufacturers halted production while running down their inventories in respond to softened demand for industrial goods.
Meanwhile, private investment remained at a low level. Although investment in machinery and equipment indicators slightly picked up following domestic machinery sales, imports of capital goods remained wanting.
At the same time, construction investment indicators slightly tapered off. This reflected that most investment was geared towards enhancing production efficiency while new investments remained low.
Overall merchandise imports, on the other hand, edged up slightly due to higher crude oil imports for petroleum production for exporting to Vietnam and an increase in aircraft imports this month. However, imports of raw materials (excluding crude oil), imports of capital (excluding aircraft) and imports of consumer goods were flat, in line with production and softened demand.
General economic activity in the second quarter of 2015 continued to recover at a slow pace, said the central bank. Merchandise exports remained sluggish due to both structural impediments in Thai manufacturing sector and the slowdown in trading partners’ economies, especially China and ASEAN countries.
Lowered expectations for Indonesia
In other developments, the pace of economic growth in Indonesia is expected to remain below 5% year-over-year in the second quarter of 2015, according to Indonesia Investments. Citing a Reuters poll involving 22 analysts, it said a further slowing of economic growth is expected. In the first quarter of 2015, Indonesia’s economic growth came at 4.71 percent year-over-year, the weakest growth pace in six years. According to the poll, analysts see a gross domestic product (GDP) growth rate of 4.61% year-over-year in the second quarter of 2015.
As for the central bank of Indonesia, Bank Indonesia said it expects economic growth in the second quarter of 2015 to be flat from growth recorded in the preceding quarter. Regarding full-year growth, Bank Indonesia still upholds the optimistic target range of 5%-5.4% year-over year, higher than the result in the Reuters poll (4.9% full-year 2015 GDP growth).
Most analysts expect to see improved economic performance in the second half of 2015. This is mostly based on expected acceleration of government spending, particularly infrastructure spending, said Indonesia Investments, an investment firm that tracks developments in the Southeast Asian economy.
Photo: Marek Slusarcyzk
