BANGKOK: Thailand's exports in June improved but imports tumbled sharply, highlighting the challenges faced by the military government as it tries to get economic growth back on track.
Annual exports grew 3.9 percent, Commerce Ministry data showed on Monday, stronger than 3.1 percent forecast in a Reuters poll. But the growth rate was well below the 7.2 percent indicated by a senior ministry official on Friday.
Imports surprisingly fell 14.03 percent from a year earlier, nearly matching the double-digit declines in April and March, and compared with expectations for a 3.75 percent decline.
Thailand mainly imports materials which are assembled into completed products and goods again, so a sharp drop could cast doubt on whether the export rebound in June can be sustained.
The mixed trade data suggests the economy may not recover as quickly as expected from a contraction in the first quarter, despite the military government's plans to kick-start growth.
Benjamin Shatil, economist with JP Morgan in Singapore, said the big fall in imports shows the economy continues to struggle.
"We are constructive on the Thai economy going into the second half of the year, but maintain our long-standing view that sluggish credit growth, a high household debt burden and limited fiscal stimulus so far this year will constrain the recovery."
Much weaker imports could mean a bigger-than-expected fall in factory output in June, said TMB Bank economist Thammarat Kittisiripat, referring to data due on Wednesday. A Reuters poll has forecast a 3.5 percent decline on year.
One bright spot was the trade balance which reverted to a surplus of $1.79 billion after two months in deficit. Economists had forecast a $0.6 billion deficit.
The data covered the first full month since the army seized power on May 22 in a bid to restore order following months of political turmoil and to revive the economy, which shrank 2.1 percent in the first quarter from the previous three months.
SIGNS OF RECOVERY
The prolonged crisis undermined consumer confidence, blocked the former government from making major investments and scared away many tourists, but did not have a major impact on exports.
Officials instead had attributed weakness in trade to lower commodity prices and sluggish global demand, which they now say is showing signs of recovery.
The Commerce Ministry said in a statement exports had shown signs of clear improvement in June, led by a 3.9 percent rise in industrial goods and a 2.6 percent gain in agricultural products, especially rice which jumped 35 percent on year.
In June, exports to the United States rose 11.2 percent from a year earlier, jumped 15.4 percent to Europe and rose 3.2 percent to China. Shipments to Japan were flat and those to Southeast Asian countries rose 2.3 percent.
Nuntawan Sakuntanaga, chief of the department of international trade promotion, told a news conference that June's performance had nudged up annual export growth in the second quarter to 0.3 percent after four straight quarters of contraction. "This makes us expect a better second half and our target of 3.5 percent growth this year is still possible."
Exports are equivalent to more than 60 percent of the Southeast Asian economy, so an improvement is pivotal for getting better growth.
Most economists now think the economy should post quarter-on-quarter growth in April-June, meaning the country will avoid a technical recession, which is commonly defined as two consecutive quarters of shrinkage.
Usara Wilaipich, economist with Standard Chartered Bank in Bangkok, expects "a V-shaped economic recovery in the second half" due to improving consumption and business activities. Consumer confidence rose for the second month in June.
Still, some analysts say further catalysts are needed to get the broader economy firmly back on track.
Economists polled by Reuters last week expected full-year growth of 1.8 percent for 2014, compared with 2.6 percent seen in the last poll in April.
The new military government is still working to fast-track long-dormant spending plans such as infrastructure projects, while tourism continues to feel the pinch from months of unrest.
Moody's Investors Service warned last week delays in reforms could negatively affect the country's credit profile.
The agency said the coup in May "has likely, for now, put a floor on deteriorating consumer and investor confidence. But progress in structural economic reform likely hinges on reduced political uncertainty, otherwise competitiveness and economic growth would further erode over the medium term."
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