China Recovery To Boost Exports, But Momentum To Wane In H213
BMI View: In line with our long-held view that prevailing global headwinds would depress external demand in 2012, trade and manufacturing data released by the Bank of Thailand (BoT) continued to reflect a lacklustre recovery in exports in Q412. As for 2013, we see the case for a more forceful recovery in external demand led by an improved macroeconomic outlook on the Chinese economy in H113.
Trade and manufacturing data released by the Bank of Thailand (BoT) earlier this week continued to reflect a lacklustre recovery across Thailand's main export segments in Q412 (including automobiles, processed agricultural products and electronics). Furthermore, looking at the nominal value of exports across all the three categories of manufactured goods mentioned above, we have yet to see exports surpassing pre-flood levels seen in mid-2011. This is in closely in line with our long-held view that prevailing global headwinds would depress external demand in 2012.
|Largely Base Effects|
|Thailand - Manufacturing Exports And Selected Components, % chg y-o-y (LHS) & % chg m-o-m 3mma (RHS)|
Signs Of A More Forceful Recovery Ahead…
In terms of our outlook for Thailand's export sector in 2013, we see the case for a more forceful recovery in external demand led by an improved macroeconomic outlook for the Chinese economy in H113. Although we estimated that China made up only 11.6% of Thailand's total trade exports in 2012, we highlight the impact of China's indirect trade linkages with Thailand through re-exports from South East Asian countries. Indeed, we expect to see a pickup in economic activity in the region over the coming months and we believe that this will result in a spillover in demand for Thai exports.
|A Mixed Picture|
|Thailand - Manufacturing Production Index S.A (LHS), % chg y-oy & % chg m-o-m (RHS)|
…But Unlikely To Last Through H113
To be sure, our view remains that the structural economic imbalances in China will begin to resurface in H213, and we expect this to drag on Thailand's export sector. Overall, we are maintaining a cautious stance on Thailand's economic outlook for 2013, and we continue to see real GDP growth coming in at a subdued 4.4% with the risks slightly weighted towards the upside.