Factory output rises along with export forecast

In an development unanticipated by many economist, Thailand’s factory output rose slightly in May year on year on higher output of electronics and rubber as major business groups also raised their forecasts for this year’s export growth after strong growth in shipments in recent months.

The Ministry of Industry said the increase indicated that the economy was gaining momentum, in line with the fact that growth has been slowly but steadily increasing over the last two years after a stagnant period in 2014. The Bank of Thailand has forecast the economy will grow 3.4 percent this year, but is slated to provide an updated forecast next week.

Manufacturing is the backbone of the Thai economy, with industrial output accounting for the largest part of gross domestic product. Industrial goods account for roughly 80 percent of exports, which surged by13 percent in May compared to a year earlier. Exports are Thailand’s key driver of growth. The Kingdom has the second-largest economy in Southeast Asia.

A poll of economists by Reuters news agency had predicted that the manufacturing production index, or MPI, would fall in May by an average of 0.2 percent. The results also represented a turnaround from April, which fell year on year by 1.8 percent in revised figures released by the ministry.

Along with the MPI, capacity utilization also rose to 62.1 percent in May, up from 53.6 percent in April. The figure, however, is still considered relatively low but indicates that Thai industry has plenty of room for growth should demand for products rise.

That demand comes to a large degree from overseas, but the Bank of Thailand has forecast only a 2.2 percent increase in exports for 2017, although it will release a revised forecast shortly.

Others, however, are more optimistic. The Federation of Thai Industries, the Thai Bankers’ Association and the Board of Trade of Thailand issued a statement last week that forecast export growth for the year of 3.5 to 4.5 percent. That is a significant increase from its previous forecast of 2.0 to 3.5 percent.

The group, considered the leading business group in the Kingdom, said, however, that the economy still faces risks, mostly from overseas markets where some economies have been sluggish, dampening demand.

The Ministry of Commerce, on the other hand is more bullish, believing that exports could grow as much as 5 percent for the year, and has set that figure as its target.