Factory output fell more than expected in March, showing how intractable political turmoil in Bangkok has hurt a key pillar of the economy and will cut growth prospects this year.
An employee dries newly moulded components on the semiconductor chip production line at Hana Microelectronics' plant at the Hi-Tech Industrial Estate in Bang Pa-In, Ayutthaya province, on April 22, 2014. (Bloomberg photo)
Industrial output in March fell for a 12th straight month, down 10.41% from a year earlier, the Industry Ministry said in a statement. That compared with February's revised 4.7% drop and an 8.2% decline in a Reuters poll.
The Commerce Ministry will later on Monday release customs-cleared trade data for March, expected to show a small annual decline in exports, a bulk of which comprises industrial goods, and a further slump in imports.
Sliding output and imports reflect how the export-reliant economy has suffered from political instability. Consumer confidence slid to a more than 12-year low last month, weaker than it had been even after the bad floods of late 2011, violent political unrest in 2010 and a deadly tsunami in late 2004.
The prolonged unrest has hit domestic demand, delayed public spending and scared away holiday makers from the capital. Growth estimates for Thailand have been cut steadily since the trouble erupted in November and further downgrades are almost certain.
Growth downgraded
The central bank has slashed its 2014 economic growth forecasts three times since November to 2.7%, a level it recently said was out of reach now. It said the economy could have contracted in the January-March quarter from the fourth quarter for the first time in a year.
Tisco Securities economist Sarun Sunansathaporn predicted the first quarter would contract 0.4% from a year earlier and about 2% against the prior quarter.
"That's because of the political impact on everything; consumption, investment, tourism, government spending," he said.
But he expected growth in the second quarter as tourism and exports should improve along with investment sentiment following a new Board of Investment to approve pending investment pledges worth about 660 billion baht after a delay.
Mr Sarun expects 2014 economic growth of 2.5%, in line with the IMF's prediction, which would be the lowest in Asia.
However, much will depend on the political situation. The commerce minister said recently that the economy might contract this year if the unrest continues until late in the year.
At factories, overall capacity utilisation in March was 64.3%, up from 58.9% in February.
Weak industries include automobile, hard disk drives, petroleum, electrical appliances and canned frozen seafood, the Industry Ministry said.
The pivotal auto sector has slowed since mid-2013 following the end of a state subsidy for car purchases in 2012. Domestic car sales fell 46.7% to 83,983 units in March from a year earlier.