Hopes for an export rebound are fading after January shipments fell at the fastest pace since November 2011.
Exports can only escape contraction for the fourth year running if they manage to record growth each month for the rest of the year, said Kulaya Tantitemit, executive director of the Fiscal Policy Office’s Macroeconomic Policy Bureau.
Exports plunged 8.91% year-on-year last month to a value of US$15.7 billion, marking the 13th straight month of decline.
Kulaya: Monthly growth needed for rebound
The FPO’s economic growth forecast review is slated for next month.
It projects GDP will come in at 3.7%, with anaemic growth of 0.1% in exports this year.
Exports are a threat to all trade-dependent economies including Thailand as the trade structure had substantially changed, prompting each country to focus more on their domestic economy and reduce imports, Ms Kulaya said.
She said the fragile state of the global economy posed an increasing threat of export contraction.
Despite the export slowdown, the country’s shipments increased to 1.5% of world exports from 1.4% in 2014.
Ms Kulaya said the FPO’s current GDP forecast for this year had already taken the drought and the government’s measures to alleviate its effects into account.
In the worst-case scenario, whereby the drought is more severe than forecast, it may shave 0.15 percentage points off GDP, she said.
Meanwhile, January demand indicators were mixed.
Value-added tax fell by 1.2% year-on-year last month as a 4.1% growth in VAT on products and services failed to cancel out effects from a 10% decline in VAT on imported goods.
The consumer confidence index fell to 64.4 points last month from 65.1 in December, while motorcycle sales expanded by 12.9% year-on-year, marking the third straight rise.
Government budget disbursements accelerated by 20.5% from the same period last year.
Finance permanent secretary Somchai Sujjapongse tried to allay fears by saying the government had prepared for a potential export contraction this year by launching a set of incentives aimed at encouraging private investment.
Domestic drivers may not be able completely to offset the decline in exports, which make up 60-70% of the country’s economic output, but it can to some extent provide a buffer to the economy.
The government’s big-ticket infrastructure projects are expected to kick off by the third quarter, Mr Somchai said.
Meanwhile, TMB Analytics, the research unit of TMB Bank, is likely to revise down its GDP and export growth forecasts this year following January's worse-than-expected export numbers, senior vice-president Benjarong Suwankiri said.
“Exports may contract or see small growth this year,” he said.
The research house estimates economic and export growth for 2016 at 3.5% and 1.8%, respectively.
Commenting on a Commerce Ministry idea to adjust the calculation of exports by adding revenue from tourism and outbound investments, Mr Benjarong said robust growth in the tourism sector could cause exports to reach the 5% growth target.