Imports: value, volume and price expanded considerably. In the second quarter of 2010, import value in US dollar term rose by 44.8 percent, continually expanding from 63.6 percent in the previous quarter. The import price rose by 9.0 percent, mainly due to the rise in oil prices. The import volume expanded by 33.5 percent, compared to the expansion of 47.4 percent in the previous quarter. The sign of domestic and global economic recovery induced a higher import orders of both raw materials and finished products in order to response to a higher economic activities. In addition, the considerable increase of import volume in this quarter was partly due to a low base effect in last year.
"...Import value rose by 44.8 percent expanding further from 63.6 percent in the previous quarter. Import value increased in most commodities. "
Expansion of import was recorded in most commodities including: (i) capital goods remarkably rose by 41.2 percent, compared to the expansion of 23.1 percent in the first quarter. This was due to the improvement in domestic investment and capacity utilization; (ii) semi-finished goods and raw materials continually expanded by 55.8 percent from the expansion of 70.4 percent in the previous quarter. The expansion in export and the improvement in domestic economy enhanced more demand on raw materials; (iii) consumer goods rose by 39.2 percent, compared to 32.8 percent expansion in the last quarter due to the improvement of private consumption and (iv) fuel and lubricant import price increased whereas import volume grew at a decelerated rate. Import value increased by 48.0 percent, compared to the expansion of 41.7 percent in the previous quarter, while import volume rose by 0.2 percent. The import price rose by 25.3 percent. The improvement of import value was owing to a considerable increase in crude oil prices, and economic recovery inducing more demand on fuel and lubricant products in an economy
"...Term of trade expanded by 1.0 percent. "
Term of trade improved from the same period of last year as export price in the US dollar term increased at a faster pace than that of import price. The price of export rose by 10.0 percent, whereas the import price increased by 9.0 percent. Hence, term of trade in the second quarter of 2010 increased by 1.0 percent.
"...Trade balance remained surplus, accelerated from the previous quarter. "
Trade balance in the second quarter recorded a surplus of 4,645 million US dollars (equivalent to 150,437 million baht), higher than a surplus of 2,133 million US dollar (equivalent to 69,834 million baht) in the previous quarter.
Production side:
Agricultural sector contracted by 1.1 percent due to the drought and the outbreak of mealy bug in cassava and brown plant hopper in rice plantations. In addition, the production of sugarcane, cassava, rubber and paddy rice declined by 47.7 23.8 4.3 and 2.1 percent respectively. However, the production of oil palm continued to grow by 18.3 percent amid an expansion of 14.1 percent in its harvesting area.
"...Agricultural sector contracted by 1.1 percent due to drought whereas a crop price and farm income improved. "
Meanwhile, crop prices recorded a growth of 27.8 percent, mainly contributed by rubber price which skyrocketed by 108.7 percent as demand from Chinese automobile sector and its related industries continued to grow. Cassava price also surged by 93.8 percent, mostly due to supply disruption as a result of the outbreak of mealy bug while demand remains strong. Domestic price of paddy decreased by 20.1 percent, in line with the world market. In addition, the lower price of paddy was also resulted from a reduction in demand from major counterparts such as the Philippines, which has already switched its import orders to Vietnam. Livestock price rose by 6.5 percent, slightly down from the previous quarter following the reduction in prices of swine and chicken due to excess supply in the market.
In summary, despite a contraction of 0.9 percent in agricultural sector for the first half of the year, farm income continued to grow by 30.0 percent amid the expansions in price and production of major agricultural products.
"...Manufacturing sector grew by 18.0 percent, mainly driven by a strong recovery in domestic demand and an improvement of construction sector.
Manufacturing sector grew by 18.0 percent, mainly driven by a strong recovery in domestic demand. As a result, the domestic-oriented industries expanded by 22.6 percent, up from 20.1 percent in the previous quarter. Main engines of growth comprised: (i) Passenger cars and motorcycles industries, which considerably expanded by 93.9 and 36.3 percent respectively. Such expansions were mainly supported by a strong demand following better confidence of domestic consumers in conjunction with an increase in farm income; (ii) Construction materials, expanded by 10.4 percent amid better prospect in construction sector; and (iii) Export-oriented industries, grew by 19.8 percent, substantially lower than a growth of 50.2 percent in the previous quarter. This was particular a result of lower exports of electronics (22.2 percent from 61.1 percent) and electrical appliances (32.0 percent from 52.2 percent). In addition, the export values of computers and integrated circuits increased by 20.5 and 27.7 percent, down from 53.0 and 59.5 percent respectively. Other industries that continued to expand were leather and footwear products, growing by 21.8 and 8.3 percent respectively, up from 14.1 and 6.5 percent in the previous quarter. Frozen seafood and canned seafood products increased by 12.2 and 0.4 percent, down from 23.9 and 8.8 percent in the previous quarter respectively. The industries which export between 30 — 60 percent of their production, grew by 17.6 percent, particularly the production of commercial cars which substantially rose by 108.2 percent. For the first half of this year, manufacturing sector expanded by 20.4 percent.
At the end of this quarter, the capacity utilization stood at 66.1 percent, slightly down from 68.4 percent in the previous quarter. Major industries that expanded their production capacity included chemical products (88.5 percent from 81.1 percent), construction materials (73.6 percent from 72.9 percent), automobile and transportation equipments (72.0 percent from 69.2 percent), and electrical appliances (60.0 percent from 56.0 percent). However, several industries continued to operate under 50 percent of their capacity. Those included tobacco (48.9 percent), leather products (29.9 percent), footwear products (46.2 percent), and furniture (26.5 percent).
"...Construction improved, mainly driven by public construction while private investment grew at a slower pace. "
Construction grew by 8.1 percent, up from 6.0 percent in the previous quarter. Such expansion was mainly driven by public construction which registered an impressive growth of 7.9 percent, considerably up from 2.5 percent in the previous quarter. Meanwhile, private construction expanded by 8.4 percent, slightly lower than 9.7 percent in the previous quarter. In addition, the total permitted area for construction declined from a growth of 35.4 percent in the previous quarter to 10.4 percent in this quarter. A slower pace of growth can be observed in all types of construction, particularly residential and industrial construction which were mainly affected by the political unrest during April - May and the suspensions of several projects especially in Map Tha Put area due to environmental problems under Article 67 of the constitution. Nevertheless, domestic cement sales continued to grow by 12.2 percent compared to the same period of last year. On the other hand, sales volumes of other construction materials remained in their downward trends, for instance, steel bar and wire rod contracted by 6.4 and 1.3 percent respectively. For the first half of the year, construction sector grew by 7.1 percent.
"...Real estate sector grew by 1.6 percent, declined from the previous quarter. "
Real estate sector grew by 1.6 percent, down from 3.6 percent in the previous quarter. The number of newly completed and registered housing substantially declined from the previous quarter, particularly in April in which the overall number slumped to only 3,040 units, the lowest in the last two years. Similarly, the property transferring grew by 31.7 percent, considerably down from a growth of 59.2 percent in the previous quarter, particularly the condominium transferring which substantially declined by 33.1 percent (QoQ). However, the property transferring started to recover since May, partly influenced by the extension of real estate stimulus measures which initially supposed to terminate at the end of March.
"...Number of tourists declined by 3.6 percent due to domestic political unrest. "
Hotels and restaurants moderately expanded by 0.2 percent compared to the same period of last year, considerably down from 15.3 percent growth in the previous quarter. This was mainly a result of political unrest in conjunction with the Iceland volcanic ash which disrupted the air traffic in Northern and Western Europe. As a result, number of inbound tourists in the second quarter was only 2.9 million persons, or declined by 3.6 percent. Average occupancy rate dropped to only 39.2 percent amid the substantial reduction in the number of tourists. In addition, the occupancy rate in central area, where the political turmoil took place, was only 35.9 percent while in the southern region reached the peak at 49.9 percent as tourists decided to change their destination towards the southern region. For the first half of the year, hotels and restaurants expanded by 7.9 percent despite a slowdown in the second quarter.
Besides, the tourism sector started to recover during the end of the quarter, indicated by the number of tourists in June with a lower-than-expected contraction of 1.1 percent compared to a considerable decline of 12.9 percent in May. The number of tourists continued to improve in July with a growth of 14.2 percent where most of returning tourists included those from China, Malaysia and South Korea. For the first 7 months of this year, as a result, the number of tourists already reached 8.8 million persons, or up by 13.8 percent compared to the same period of last year.
"...Employment dropped by 0.5 percent. The unemployment rate recorded at 1.3 percent. In addition, tension in employment situation started to ease off. "
Employment in the second quarter was 37.46 million persons, down by 0.5 percent compared to the same period of last year. In addition, employment in agricultural sector declined by 6.6 percent while employment in non-agricultural sectors grew by 3.1 percent. In particular, construction sector and wholesale and retail sector recorded a growth rate of 9.3 and 4.9 percent respectively amid the recovery in domestic economy and construction sector.
Number of unemployment in this quarter was 499,000 persons, considerably declined by 174,000 persons compared to the same period of last year (or down by 25.9 percent). Additionally, the unemployment rate stood at 1.3 percent, as a result, the number of registered persons claimed for unemployment compensation substantially declined by 18.5 percent.
Moreover, tension in employment situation particularly in manufacturing sector started to ease off as the ratio of vacancies to registered applicants went down from 1.0 in the previous quarter to 0.7 in this quarter. Consequently, employment in manufacturing sector expanded by 0.8 percent, gradually improved from a contraction of 1.1 percent in the previous quarter. Nevertheless, skill labor shortage can still be observed in several industries such as electronics and automobile.
"...Government revenue collection exceeded the target, following economic expansion. Whereas, budget disbursement lower than target..."
Fiscal condition:
Fiscal balance: In the third quarter of fiscal year 2010 (April — June 2010), government revenue was 554,866 million baht, exceeded the target and previous year collection by 24.0 and 20.6 percent respectively. For the first 9 months of fiscal year 2010 (October 2009 — June 2010), revenue collection has exceeded the target by 246,177 million baht or 24.8 percent.
On expenditure side, the total budget disbursement was 379,479 million baht, equivalent to 22.3 percent of the annual budget. The current disbursement level was proved to be less than 25.0 percent of the target set by the cabinet and below the disbursement level of the same quarter of fiscal year 2009. The current budget has been disbursed by 23.6 percent of total current budget while the capital budget has been disbursed by 13.8 percent of total capital budget, significantly below the target for capital budget disbursement set at 23.0 percent. Such low levels of capital budget disbursement were due to long public holiday and political unrest during the second quarter. On the contrary, for the first 9 months of fiscal year 2010, the total budget disbursement was 1,208,779 million baht, equivalent to 71.0 percent of the annual budget and higher-than-targeted at 68.0 percent.
"...For the first 9 months of fiscal year 2010, the total disbursement under SP2 was at 58.6 percent of total allocate budget. "
Regarding the SP2, the disbursement of investment projects during the third quarter of fiscal year 2010, was 73,086 million baht, equivalent to 23.9 percent of total allocated budget (305,369 million baht). For the first 9 months of fiscal year 2010, the total disbursement under SP2 was 178,876 million baht, equivalent to 58.6 percent of total allocate budget.
"...Fiscal condition remained sound with public debt per GDP at 42.6 percent. "
Public Debt at the end of May 2010 stood at 4,144,261 million baht, equivalent to 42.6 percent of GDP, slightly increased from 4,124,712 million baht at the end of March 2010. The increase in public debt was due to an increase in direct government borrowing in domestic market in order to finance budget deficit, debt management and SP2.
Financial Condition:
"...Policy rate remain low in most of the countries. "
Policy rate kept unchanged. During the second quarter, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 1.25 percent per annum. The decision was made in order to support gradual recovery of the Thai economy, while the heightened political risk remained a key obstacle clouding the economic growth. Similarly, policy rate in most of the countries were kept unchanged except India, Australia, Taiwan and Malaysia where the policy rate was adjusted upward. Nevertheless, in July 2010, the MPC decided to raise the policy interest rate by 25 basis points, from 1.25 to 1.50 percent per annum. Such decision was made on the basis that economic recovery has become more evident and the economy should continue to grow, thus lessening the need for an exceptionally accommodative monetary policy.
"...Commercial banks’ deposit and lending rate remains stable. "
Commercial banks’ interest rate remained low. At the end of the second quarter, an average of 12-month deposit rate and MLR lending rate remains stable at 0.68 and 5.86 percent per annum. The real deposit and lending rate slightly increased to -2.63 and 2.56 percent per annum, respectively.
" Commercial banks’ deposit and loan extend to private sector continued to expand "
Commercial bank’s deposits including bill of exchange (B/E) expanded by 2.2 percent, accelerated from 1.1 percent expansion in the previous quarter. This resulted from growing appetite for higher yield investment, like bill of exchange (B/E), in the current low interest rate environment. Similarly, private loan expanded at a faster pace, from 6.0 percent in the previous quarter to 8.3 percent at the end of the current quarter, owing to the household loan expansion, especially in housing loans and loan for purchase or hire purchase of cars and motorcycles. Corporate loan contracted by 2.5 percent, significantly improved from a contraction of 6.5 percent at the end of the previous quarter following advance in private investment. Nevertheless, credit card spending continued to slowdown from raising concern over the political unrest. In addition, NPLs(2) to outstanding loan has continually curved down to 2.40 percent from 2.50 percent in the previous quarter.
"...Liquidity decreased sharply in net repurchase position. "
Credit (excluding R/P) to deposits (including bill of exchange) ratio increased from 88.6 percent at the end of the first quarter to 91.2 percent at the end of the current quarter, following acceleration in loans. Consequently, excess liquidity in commercial banking system decelerated from 1.45 trillion baht to 1.18 trillion baht.
"...Thai baht continued to appreciate against US dollar. "
Thai baht continued to appreciate against US dollar. An average exchange rate in the second quarter of 2010 was at 32.34 baht per US dollar, appreciated by 1.52 percent from the previous quarter and 6.64 percent from the same period of last year. Thai baht continued to appreciate against US dollar due to inflow of investment capital in response to Asian economic recovery.
Furthermore, Thai baht appreciated against other regional currencies including that of exportcompeting- countries. Nominal effective exchange rate (NEER) and real effective exchange rate (REER) increased by 3.21 and 4.77 percent respectively.
In July 2010, Thai baht continually appreciated to an average of 32.28 baht per US dollar, an average exchange rate over period of 1st — 19th August was at 31.91 baht per US dollar.
Note
(2) NPL in financial institutions (excluding BIF and credit fanciers).
"...Capital inflow in banking sector increased. "
Capital and financial account recorded a net inflow.(3) In the second quarter, capital and financial account recorded a net inflow of 3.6 billion US dollars, decreased from 5.2 billion US dollars in the previous quarter. The net inflow was mainly contributed by inflow from banking sector, accelerated from 0.2 billion US dollars to 2.3 billion US dollars, while inflow from nonbank sector slowed down to 0.7 billion US dollars.