- Agricultural commodity: export price accelerated notably and supported a robust expansion of export value. In the third quarter export of agricultural commodity grew by 66.1 percent with the increase in export price of 56.8 percent. Export price of rice, cassava and rubber continued to increase significantly but export volume of agricultural commodity slowed down from the first half of 2008 to 5.8 percent due to the reduction in export volume of cassava in line with the contraction of its domestic production. Export volume of rice and rubber slowed down as rubber’s demand from China (the major exportmarket) decelerated in tandem with the slowdown of tire industry and the release of rubber stock into the market.
- Manufacturing products: export value remained favorable with the continued increase in export price of 10.7 percent and export volume of 10.8 percent and resulted in 22.7 percent expansion of its export value in the third quarter. The key drivers for manufacturing export expansion were the export of automobile, petroleum products, rubber products, and petrochemical products. Meanwhile export value of computer and parts, gems and jewelry, and plastic slowed down. In addition, integrated circuit, machine and parts, air-conditioner and parts, which are among major export commodities, experienced a contraction in export value. However, the strong export expansion in the third quarter was a result of advanced orders before the full-blown financial crisis while effects on the real economy were still unclear.
- Electronic products showed a clearer sign of export slowdown. In the third quarter, export value of electronic products increased by 2.5 percent, slowed down from 5.6 and 7.4 percent in the first and second quarter respectively. The deceleration in its export was partly attributable to the demand contraction after Beijing 2008 Olympic Games and the slowdown in electronic market cycle that began the second quarter of 2007. The commodities with the contraction of its export value were integrated circuit, printer circuit, and ball bearing. The export of computer and parts, the main electronic export commodity (with its share of 10.3 percent in total export), significantly slowed down with its growth rate of 6.8 percent, compared to 17.9 and 18.2 percent in the first and second quarter respectively.
Key Export Market
(%YOY) 2007 2008
Year H1 Q3 Q4 Q1 Q2 Q3 Share
Major Market 10.9 12.2 2.4 17.3 12.2 20.7 20.1 50.4
USA -1.3 -0.1 -9.3 5.2 7.2 6.2 12.0 11.2
Japan 9.7 12.9 1.9 11.9 6.3 19.8 23.6 11.1
EU (15) 15.5 23.0 10.4 7.6 11.7 8.3 9.9 10.9
Asian (5) 19.6 14.7 8.5 41.3 21.8 42.9 31.7 17.1
Others 25.6 7.1 22.2 30.8 31.7 30.6 30.9 49.6
Hong Kong 19.7 12.2 23.6 39.3 46.3 34.0 9.4 5.4
Taiwan -1.5 13.8 -22.4 -5.4 -26.7 -13.3 -4.2 1.4
South Korea 11.1 16.7 5.1 12.1 13.9 12.2 60.4 2.4
Middle East 29.0 25.6 31.7 32.2 23.9 31.3 46.5 5.9
India 47.1 62.7 56.7 17.0 24.4 31.6 24.8 2.0
China 26.4 27.4 25.8 25.4 34.2 21.5 13.9 9.2
Source: Ministry of Commerce
- Export markets: export to major markets continued to expand and export to other markets increased favorably. In the third quarter, exports to the major market expanded satisfactorily with the increase of export value to Japan and the US by 23.6 and 12.0 percent respectively (the expansion from a low base in the third quarter of 2007). Export commodities which had a satisfactory growth rate in the US market were canned seafood, gems and jewelry, radio receiver, television, and iron and steel, etc., and those in Japanese market were rubber, processed chicken, electrical appliances and parts. Export to Asian and EU markets increased by 31.7 and 9.9 percent respectively while export to other markets such as India and Middle East continued to grow satisfactorily. However, export to China and Hong Kong started to slowdown due to economic deceleration, in particular, export of rubber and electronic products.
For the first nine months, export value in US dollar term increased by 25 percent with export price and volume growth of 12.5 and 11.0 percent respectively. In baht term, export value and price increased by 18.4 and 6.4 percent respectively. Export value of agricultural and industrial products grew by 58.9 and 22.6 percent respectively.
- Import accelerated, particularly import of raw material and semi-finished goods. In Q3, import value grew by 39.1 percent in US dollar term, compared to 29.3 percent in the second quarter, attributable to growth in all import categories in particular raw materials and semi-finished goods in tandem with export expansion. Besides, there was expectation about Thai baht depreciation and high import price. Import of fuel and lubricant rose in line with the surge in oil price in July 2008.
Furthermore, import volume grew at remarkable rate of 19.8 percent, comparing to 9.9 percent in the second quarter. Meanwhile import price slowed down to 16.0 percent, mainly due to contraction of oil price in August and September 2008. In term of Thai Baht, import value and price increased by 38.3 and 15.3 percent respectively. However, the high growth of import, as seen in 2008, was an expansion after a period of import slowdown in 2007.
- Capital goods: import volume expanded by 21.1 percent, accelerated from 17.3 percent in previous quarter. Main drivers for the import expansion were agricultural machinery, tools and parts and transportation equipments. Nonetheless, Import of capital goods in this quarter fluctuated considerably as a result of fluctuation of import in previous year, recession of global economy and political uncertainties. Therefore, business sectors have to adjust theirs policy according to unstable situation. In the third quarter, import volume and value expanded by 15.9 and 4.5 percent consequently.
- Raw material and semi-finished goods: Import value expanded by 37.4 percent, accelerated from 27.9 percent in the previous quarter. Import value of iron and gold continued to increase in spite of higher iron price as importers speculated that this price would continue its increase, thus they tried to increase stock before price rising. Furthermore, the increase in import volume of gold was a result of lower price which led to higher investment and speculative demand. This was seen in the import volume and value of raw material and semi-finished goods which grew by 21.8 and 12.8 percent respectively.
- Fuel and Lubricant: Import value in the third quarter increased by 60.0 percent, accelerated from 51.2 percent in the second quarter due to the increase in price and volume by 44.5 and 9.8 percent respectively. In this quarter, import volume of crude oil decreased by 10.2 percent but price increased by 78.6 percent.
- Consumer goods: Import value expanded by 33.1 percent because the appreciation of Thai baht had encouraged consumers with high purchasing power to spend in imported products such as electrical appliances, watches and parts, milk and diary products, gems and jewelry, lens and glasses and parts. In the third quarter, import volume and price increased by 29.7 and 2.6 percent respectively.
For the first 9 months, Import value in term of US dollar increased by 34.5 percent, with increased in volume and value by 15.5 and 16.4 percent respectively. In term of baht, import volume and value increased by 27.4 and 10.1 percent respectively. Export volume on capital goods, raw material and semi-finished goods, fuel goods and consumer goods increased by 25.3, 30.6, 59.4 and 34.2 percent consequently.
- Term of trade improved as export prices increased by 15.0 percent, while import price increased by 16.0 percent, slowed down from the average of 17.7 percent. This led term of trade in the third quarter improved, by decreased only 0.8 percent, lower than decrease by 4.9 and 4.4 percent in the first and second quarter.
- Trade Balance registered a deficit of 1,296 million US dollars (or 43,465 million baht), compared to a surplus of 425 million US dollars in the second quarter, and a deficit of 109 million US dollars in the first quarter. For the first 9 months, trade balance recorded a deficit of 979 million US dollars, which was equivalent to 31,757 million baht.
- Current account was recorded a deficit in the third quarter. Net service, income and transfer during the third quarter registered a deficit of 1,166 million US dollar, mainly due to an increase in repatriation of investment income, a slowdown of foreign tourist income during a low season and also the impact of high oil price and political uncertainties. As combine with deficit of trade balance, current account marked deficit at 2,461 million US dollars (or 83,189 million baht), compared to 1,016 million US dollars in the second quarter. For the first 9 months, current account deficit 788 million US dollars (or 27,040 million baht).
- Production Side
- Agricultural sector expanded by 9.9 percent, notably picked up from 3.1 and 8.6 percent in the first and second quarter. As a result of rising price of agriculture products, farmer expanded agricultural production and plantation area. Even though in September, many locations around the country were flooded, the damages were minimal. Growth in main agriculture productions remained high; including rice, cassava, oil palm and rubber. Price of major agricultural products had increased; such as rice (increased by 84.4 percent), rubber (increased by 46.3 percent), oil palm (increased by 8.1 percent) and cassava (increased by 3.8 percent).
Export of Thai agricultural products accelerated by 62.9 percent compared with 49.4 percent growth in the previous quarter, with export volume of Thai rice expanded by 23.4 percent. As a result of sharp rise in overall agriculture prices associated with continued expansion of products, farm income rose impressively by 57.0 percent in the third quarter. Averaged over 9 months, farm income rose by 44.4 percent and value of agricultural sector expanded by 6.9 percent, compared to 1.5 percent expansion from the same period of last year.
- Industrial sector expanded by 6.1 percent, decelerating from 9.5 percent in the first quarter and 7.7 in the last quarter of 2008 due to a slowdown in industrial production for domestic market which resulted from uncertainty in political situation and delay of mega project investment. Many industrial productions like basic and fabricated metals products, motor vehicles and alcoholic beverages had slowed down. While textile and cement production reported negative growth. Export-oriented industries also experienced a slow down; including electronics, electrical appliances and automobile and parts. The exports of wood furniture and leather products experienced a major contraction as demand in the US market fall sharply, as a result of sub-prime crisis. In the third quarter of 2008, capacity utilization rate was 69.6 percent, slightly lower than 75.6 and 71.1 percent in the first and second quarter. Over 9 months of 2008, industrial sector had expand by 7.8 percent.
- Construction sector continued to contract, with 4.5 percent contraction in the third quarter. As a result construction sector had contracted by 2.5 percent in 9 months period. The main reasons are as follows: 1) contraction in private construction; especially in industrial building which contracted by 14.4 percent and slowdown in resident and commercial building 2) slowdown in public construction by both central and local government and 3) rising price of construction material; especially steel price which rose by 61.7 percent.
- Real estate sector in the third quarter had slowed down concurrent with weaker economic situation; decrease in purchasing power and delay in decision making process. Consumer purchasing behavior for new house has shifted towards smaller home, with expansion in medium-size residents with price range around 3 — 5 million baht and townhouse in Bangkok urban areas with price range not exceeding 2 million baht. While demand for condominium, especially along the sky train construction line, was still in the upper trend. Speculation in real estate played a vital role in the first 8 months, as ownership transfers of condominium were mainly second hand trade. Bank had put more restrictions on approval of housing loan to both buyer and developer, which inevitably impacts the availability of capital in this sector. This action contributed to a slowdown in the third quarter.
- Hotel and restaurant expanded by 0.2 percent in the third quarter compared with the 9.2 and 5.9 percent expansion in the first and second quarter. For the first time in the past 3 years, numbers of foreign tourists reported a negative growth of 1.7 percent; with negative growth reaching 16.5 percent in September. This was due to prolonged political uncertainty which resulted in unpleasant events such as a declaration of state of emergency during September. As a result, the rate of hotel accommodation in September dropped to 53.7 percent compared with 57.7 percent in the same period of last year. Furthermore, spending power of foreign tourists had dramatically declined as a result of rising traveling cost and others expenses; especially accommodation cost that rose by 27.7 percent.
- Financial sector grew by 9.1 percent, owing to continuing credit expansion. Overall asset quality had improved, as reflected in lower proportion of NPL to total asset. The commercial loans in banking system grew by 13.2 percent, accelerating from 11 percent in the last quarter; this expansion has continued for 4 consecutive quarters. Business loan had expanded by 12.3 percent. This reflected higher demand for working capital in response to according to higher raw material and transportation cost. Consumer loans had mainly grown in housing mortgage category.
- The overall energy efficiency continued to improve with a more balance and flexible energy structure.
- A continuous decline in the ratio of petroleum usage to GDP indicated that overall energy efficiency had been improved. In the third quarter of 2008, the ratio of oil consumption to GDP stood at 0.8566 percent, decreased from 0.9280 percent in the second quarter, and relatively lowered than that in the same period of last year (the ratio stood at 0.9416 percent in the third quarter of 2007).
For the first 9 months, the ratio of oil consumption to GDP stood at 0.9017 percent, decreased from 0.9628 percent in the same period of last year. The improvement was also seen in a significant shift towards consumption of alternative energy which is currently available at lower cost than traditional benzene and diesel. Effectively, GDP was generated at lower cost as the utilization of petroleum products became more efficient and more concentrated in cheaper fuel.
(Continue to).../- Domestic consumption..