“Thai economy in November 2011 exhibited a clear sign of economic contraction as an aftermath of the flood disaster."
Mr. Somchai Sujjapongse, Director?General of the Fiscal Policy Office, revealed that “In November 2011, Thai economy showed a clear signs of contraction. This was mainly due to the flood that negatively affected manufacturing sector, while domestic spending as well as exports contracted for the second consecutive month. The slowdown in domestic spending was reflected by the real term value?added?tax (VAT) collection contracted that ?1.0 percent per year, as compared to the previous month increase of 11.3 percent per year, while number of passenger car sales showed a greater contraction of ?62.1 percent per year, as compared to the previous month decrease of ?38.8 percent per year, mainly due to the halt in automotive production from the supply chain disruption from closures of manufacturing plants producing automotive parts located in the affected areas. Furthermore, private investment also showed a sharper contraction, as indicated by the number of commercial car sales which decreased ?71.5 percent per year, as compared to the previous month decline of ?41.8 percent per year. Meanwhile, exports sector in November contracted, with export value of 15.5 billion USD, falling ?12.4 percent from last year, mainly from a drop in exports of manufacturing goods while exports of agricultural and agro?industrial goods continued to show an expansion.
Ms. Kulaya Tantitemit, Senior Expert on Macroeconomic Policy, further elaborated that “Economic indicators in November 2011 signalled that the impact from the flood sharply worsened agricultural and service sectors, while manufacturing sector fell severely as indicated by the Manufacturing Production Index (Preliminary) which contracted at ?48.6 percent per year as compared to the previous month decline of ?30.1 percent per year. Agricultural sector indicators also showed a drop of ?7.2 percent per year, particularly due to a fall in major rice production. Furthermore, service sector indicators also showed a contraction as reflected by number of inbound tourists of 1.21 million persons, showing the first contraction in 18 months after the political unrest in May 2010 of ?17.9 percent per year,” Director?General of the Fiscal Policy Office concluded that “Thailand’s economic indicators in November 2011 showed a clear sign of contraction, mainly from the impact of the flood which caused the stagnation of production in almost every sector, especially manufacturing sector. As such, the Fiscal Policy Office forecasted that Thai economy in the 4th quarter of 2011 would contract ?5.0 percent year?on?year, resulting in the economic growth of 1.1 percent for 2011.”
Monthly Economic Report (November 2011)
Thai economy in November 2011 exhibited a clear sign of economic contraction as an aftermath of the flood disaster
1. Private consumption in November 2011 showed a sign of contraction due to the flood. This was reflected by the real?term VAT collection in November 2011 that decreased ?1.0 percent from last year, as compared to the previous month growth of 11.3 percent. This was consistent with import volume of consumer goods in November 2011 that grew at a slower pace at 3.9 percent, decelerating from the previous month increase of 6.0 percent. Meanwhile, consumption of durable goods showed a sharp contraction. This was partly reflected by the number of passenger car sales in November 2011 which contracted for the second consecutive month at ?62.1 percent from last year, after a 3?month consecutive growth owing to the rebound of automotive sector from the Tsunami disaster in Japan. This contraction was mainly due to the halt in automotive production as there was a supply chain disruption from closures of manufacturing plants producing automotive parts located in the affected areas. This was also in tandem with the number of motorcycle sales in November 2011 that contracted for the second consecutive month at ?11.0 percent from last year. Furthermore, Consumer Confidence Index in November 2011, decreasing for the fourth consecutive month to stood at the lowest level in 122 months at 61.0 points from 1) impact of the flood that negatively affected several regions of Thailand, especially Bangkok and 7 industrial estates causing slowdown in economic growth as well as considerable damage to private and public properties 2) concerns about higher cost of living during and after the flood disaster and 3) slowdowns in global economic growth from European debt crisis.
2. Private investment in November 2011 also showed a sign of contraction. This was indicated by the sharp contraction in commercial car sales in November 2011 of ?71.5 percent from last year, from the previous month decrease of ?41.8 percent year?on?year. Imports of capital goods in November 2011, showed the first contraction since November 2009 at ?4.1 percent from last year, decelerating from the previous month growth of 6.8 percent per year. However, looking into details, several special items such as airplanes and drilling platforms and floating structures were imported in November 2011. After taken these into account, import volume excluding special items showed a further decline of ?7.1 percent per year, from last month contraction of ?2.0 percent. Private investment indicators of construction sector in November 2011 also exhibited a sign of contraction as measured by property tax collection in November 2011 which fell ?18.6 percent from last year, following the previ ous month decrease of ?17.0 percent. This was consistent with a drop in cement sales in November 2011 which showed a contraction of ?0.6 percent year?on?year, decelerating from the previous month growth of 11.7 percent from last year, as a result of the widespread flood disaster that covered several provinces that halted the construction business coupled with higher construction material prices.
3. Exports in November 2011 slowed down considerably from the flood that affected exporting sector, especially manufacturing goods. Export value for November 2011 stood at 15.5 billion USD, a contraction of ?12.4 percent from last year, decelerating from the previous month growth of 0.3 percent per year. This was due to the ?14.6 percent contraction of export volume, while export price grew at a decelerated pace at 2.5 percent per year. Looking into details, exports in manufacturing sector showed the highest contraction of ?26.7 percent from last year, owing to 1) a contraction in exports of electronics products of ?47.4 percent from last year, 2) a fall in exports of vehicles and parts of ?54.7 percent year?on?year, 3) a decrease in exports of electrical appliances of ?21.9 percent from last year and 4) a drop in exports of jewelleries of ?10.8 percent year?on?year. Meanwhile exports of agricultural and agro?industrial sectors continued to expand at 11.3 percent from last year, mainly due to 1) an increase in exports of rubber at 24.1 percent from last year, 2) a growth in exports of tapioca of 20.2 percent from last year and 3) a rise of exports of food products of 11.3 percent year?on?year. Furthermore, exports to major market contracted ?16.9 percent year?on?year, from a drop in exports to EU, the US and Japan at ?28.8, ?13.9 and ?8.7 percent year?on?year respectively, while exports to emerging markets also showed a decline of ?8.4 percent from last year, owing to a contraction of exports to China, Hong Kong, South Korea and Taiwan of ?9.7, ?43.6, ?11.3 and ?11.0 percent year?on?year respectively. Imports value in USD terms also showed a contraction. Import value in November 2011 amounted to 16.9 billion USD, contracting at ?2.4 percent per year, decelerating from the previous month expansion of 21.5 percent per year. This was due to a decline in import volume of ?10.1 percent per year and a slowdown in import price of 8.5 percent from last year. As such, the smaller exports value as compared to that of imports resulted in a trade deficit of ?1.4 billion USD in November 2011.
4. Fiscal indicators in November 2011 showed that revenue collection slowed down and was slightly lower than estimated, while budget disbursement contracted from the same period last year. In November 2011, net government revenue collection (net of local authorities’ subsidy allocation) amounted to 137.8 billion Baht, decreasing at ?5.7 percent per year or 923 million baht less than revenue estimation. This was mainly due to the impact of the flood causing lower than estimated revenue collection of (1) value added tax (2.9 billion baht lower than estimation) and (2) excise tax collection on cars (4.3 billion baht lower than estimation), owing to the halt in automotive production from closures of several manufacturing plants producing automotive parts located in the affected areas, as well as the disrupted transportation system during the flood. Budget disbursement in November 2011 recorded at 150.2 billion Baht, a contraction of ?32.7 percent per year. This amount was composed of (1) Current year expenditure of 131.9 billion Baht, contracted at ?36.4 percent per year (comprising a current expenditure of 127.2 billion Baht, or a decrease of ?35.2 percent year?on?year and a capital expenditure of 4.7 billion Baht or a decline of ?56.7 percent per year) and (2) Carry over budget of 18.4 billion Baht. The important budget disbursement items in November 2011 are (1) Department of Local Administration’s expenses of 13.5 billion Baht (2) National Health Security Office expenses of 7.7 billion Baht (3) Public Debt Management Office’s debt repayment expenses of 7.5 billion Baht and (4) Student Loan Fund’s expenses of 4.5 billion baht.
5. Supply?side indicators in November 2011 indicated that the negative effect from the flood caused a sharp decline in agricultural and service sectors, while manufacturing sector contracted severely. The Manufacturing Production Index (Preliminary) in November 2011 contracted at ?48.6 percent per year, following the previous month decline of ?30.1 percent per year, mainly due to a decrease in production index of almost every manufacturing sector, except for food and beverages production index, which showed a slight expansion at 1.8 percent from last year, improving from the previous month decline of ?5.7 percent per year. This was consistent with the Thai Industrial Sentiment Index in November 2011 which has declined for six consecutive months to record at the lowest level in 29 months at 87.5 points. Meanwhile, agricultural sector’s performance as measured by Agricultural Production Index (Preliminary) in November 2011 also showed a decrease of ?7.2 percent from last year, decelerating from the previous month expansion of 7.4 percent from last year, as a result of a contraction in major rice production. Furthermore, agricultural price in November 2011 showed a first contraction in two years at ?1.5 percent per year, resulting in a decline of real farm income in November 2011 of ?13.4 percent per year, as compared to the previous month growth of 7.3 percent per year. This was consistent with the service sector indicators as reflected by tourism indicators in November 2011 which also contracted. The number of inbound tourists was recorded at 1.21 million persons, showing the first contraction since May 2010 (during the political unrest in Thailand) of ?17.9 percent from last year. This was mainly due to the flood in several parts of Thailand, causing governments in 42 countries to announce the warning against travelling to Thailand, which had a negative psychological effect and caused a drop in the number of tourists.
6. Economic stability remained robust. Headline inflation in November 2011 grew by 4.2 percent from last year, or an increase of 0.21 percent from the previous month, owing to higher fresh food and other consumer goods prices such as rice flour and other flour products, fish and shellfish, eggs and dairy products, fresh vegetables, non?alcoholic beverages, and processed food, as a result of the flood. Core inflation remained at 2.9 percent per year or showing a slight growth of 0.03 percent from the previous month. Unemployment rate in September 2011 stood at 0.8 percent of total labour force, an equivalent of 300,000 unemployed persons, higher than the previous month level of 270,000 unemployed persons. Looking into details, in September 2011, there were unemployed persons in agricultural, manufacturing, and service sectors as well as other categories such as those who never worked before of 39,000 persons, 58,000 persons, 48,000 persons and 151,000 persons respectively, resulting in the unemployment rate in the 3rd quarter of 2011 of 0.6 percent of total labor force. Public debt to GDP ratio at the end of September 2011 stood at 41.03 percent, well below the 60 percent public debt ceiling under the Fiscal Sustainability Framework. Likewise, external economic stability remained robust and resilient to the risk from volatilities in the global economy as indicated by the high?level of international reserves at the end of November 2011 at 178.3 billion USD or approximately 3.1 times of short?term external debt.
Source: Fiscal Policy Office / www.fpo.go.th