No. 23/2011
The economy in May 2011 continued to expand on the back of robust consumption and investment, as well as strong external demand upholding export and tourism sectors. However, production and exports of automobile industry continued to contract for the second month due to the impact from the natural disasters in Japan. However, the problem began to subside toward the end of the month.
With regard to overall stability, price pressure remained following increased production costs from high commodity prices, together with strong demand.
Details of the economic conditions are as follows:
Domestic demand continued to expand. Private Consumption Index (PCI) grew by 5.1 percent year-on-year (yoy) mainly from continuous expansion of VAT, imports of consumer goods, and fuel consumption. Meanwhile, domestic automobile sales continued to contract due to supply disruption in automobile industry from the natural disasters in Japan. Concurrently, Private Investment Index (PII) expanded by 11.1 percent (yoy), moderating from last month from decelerated investment in machinery and equipment. This was attributable to a slowdown in imports of capital goods after the prior period’s acceleration, as well as a decline in commercial car sales following decreased automobile production. However, investment in the construction sector expanded as the construction area permitted in municipal areas increased, mainly from rising commercial construction projects in Bangkok. Likewise, domestic cement sales improved from the previous month in response to increased industrial construction projects. Fiscal sector remained supportive. However, May’s net government revenue stood at a high level from increased corporate income tax collection in line with favorable economic expansion. Higher revenue relative to expenditures resulted in a cash balance surplus of 14.0 billion baht. Strong farm income and high employment rate, despite moderation from the previous month, remained supporting factors for the expansion in domestic demand. Farm income rose by 11.7 percent (yoy), growing at a slower pace from last month due to a contraction in agricultural production of 5.9 percent (yoy).
This was mainly due to a decline in rice production as a result of early plantation and harvesting during the prior period. In addition, production of rubber and fruit decreased as a result of unfavorable weather condition. Meanwhile, agricultural price increased by 18.7 percent (yoy), moderating mainly from a decline in rubber price as the automobile industry was affected by the natural disasters in Japan. Unemployment rate remained low at 0.8 percent, while depository corporations’ private credits rose by 15.6 percent (yoy) from an expansion in credits extended to household and corporate sectors.
External demand, both export and tourism sectors, continued to expand robustly. Export value amounted to 19,284 million US dollars, increasing by 17.3 percent (yoy) from both quantity and price (or 25.9 percent (yoy) when excluding gold). In particular, exports of agricultural products grew from a new record high of rice export following the government’s destocking. Likewise, exports of manufacturing products grew notably from plastic products, chemicals, and electrical appliances following continuous external demand. However, exports of automobile and parts continued to contract from decreased automobile production. Tourism sector grew favorably. The number of foreign tourist arrivals in Thailand totaled 1.4 million people, expanding by 66.5 percent (yoy). This was due to the rising number of tourists across all regions, especially from China, Malaysia, and India, together with last year’s low base effect as a result of the political unrest.
Expansion in domestic and external demand led to import value of 19,010 million US dollars, growing by 34.4 percent (yoy) partly due to 1,062 million US dollars imports of gold (when excluding gold, import value expanded by 27.7 percent (yoy), close to the prior month’s rate). May’s import value grew across all product categories, except for imports of vehicles and parts, which decelerated continuously from the previous month due to the natural disasters in Japan.
Regarding Production sector, the Manufacturing Production Index (MPI) dropped by 3.9 percent (yoy), but improving from last month’s contraction of 8.1 percent (yoy) following expansion in the production of electrical appliances and electronic tube and parts from the ongoing demand. In addition, hard disk drive production recovered in response to decreased inventory level. However, production in the automobile industry continued to contract from the supply disruption problem. Nevertheless, this problem began to resolve toward the end of May. In addition, production in garment and textile industries continued to decrease following customers’order postponement in order to assess the pricing condition of rawmaterials.
For internal stability, price pressure remained following increased production costs from high commodity prices, together with strong demand. The headline inflation stood at 4.19 percent (yoy), accelerating mainly from an increase in energy prices. Meanwhile, the core inflation accelerated by 2.48 percent (yoy) from the gradual pass-through of production costs into the seasonings and condiments, non-alcoholic beverages, and prepared food prices. External stability remained sound with international reserves standing at a high level.
Contact: Macroeconomic Team
Tel: +66 (0)-2283-5647, +66 (0)-2283-5648
e-mail: [email protected]
Source: Bank of Thailand