Thailand Economic Data Shows Thai Recession Has Not Yet Hit

UNCLAS BANGKOK 000879 STATE FOR EAP/MLS AND EB STATE PASS TO USTR TREASURY FOR OASIA SINGAPORE FOR FINATT BAKER SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EFIN ECON EINV ETRD TH SUBJECT: Thailand Economic Data Shows Thai Recession Has Not Yet Hit Bottom Sensitive But Unclassified. For Official Use Only. ¶1. (SBU) Summary and Comment: February 2009 economic data released by the Bank of Thailand (BOT) confirmed Thailand's weakened economic situation due to the impact of the global economic crisis. Key economic indicators remain well below last year's levels, including the Manufacturing Production Index (MPI),Private Consumption Index (PCI),Private Investment Index (PII),and the value of exports. The MPI and the value of exports remain well below last year's levels despite a slowing of the rate of decrease from last month. Thailand's trade surplus continued for the third month in a row and widened due to a sharp decrease in imports by 43.5 percent since February of last year. The continuing collapse in imports, manufacturing inputs in particular, probably indicates that the Thai economic slump has not yet reached bottom. End Summary and Comment. ¶2. (U) On March 31, the Bank of Thailand released February 2009 data detailing the performance of key economic indicators, nearly all of which are below last year's levels. The Manufacturing Production Index (MPI) contracted 19.8 percent year-on-year (yoy),but this was a smaller contraction than January's drop of 21.2 percent (yoy). When seasonally adjusted, the MPI rose 1.9 percent month-on month (mom),driven up by improvements in export-oriented industries like electronics. ¶3. (U) The value of exports fell 11.1 percent (yoy) in February, a smaller contraction than January's drop of 25.3 percent (yoy). The smaller contraction was mainly due to an increase of gold exports in February as a result of gold's rising price. With gold excluded, February exports dipped by 24.5 percent (yoy),close to the January figure. ¶4. (U) The Private Consumption Index (PCI) contracted at a faster pace than January, especially on big ticket items like passenger car sales (-15.2 percent yoy),motorcycle sales (-14.5 percent yoy),and imports of consumer goods (-18.3 percent yoy). The Private Investment Index (PII) also shrank by 12.9 percent (yoy),driven down by imports of capital goods and commercial car sales. ¶5. (U) Though export performance remained negative, the trade surplus continued for the third month in a row and widened in February due to a sharp decrease in imports (-43.5 percent yoy). The current account surplus also doubled from January, registering at USD 4.4 billion. With a small capital outflow, the balance of payments was in surplus, resulting in increasing in the country's official reserves to USD 113.3 billion. ¶6. (U) Analysts quoted in the media stated their belief that, with the continued weakening of global demand for Thai exports, manufacturers will have to cut output further and stop ordering raw materials. With the inflation index still slightly negative, the BOT may cut its policy rate further from the current 1.5 percent in its next Monetary Policy Committee (MPC) meeting on April 8.