Thai private investment up in April but exports still struggle

BANGKOK: Private investment in Thailand rose in April as industry continued its recovery from last year’s devastating floods but exports were lower than a year before, central bank data show.

Many factories are still closed and global demand is slowing, but the central bank said exports of manufacturing goods, especially cars and parts plus computers and electronic parts, had picked up.

It noted a big drop in rice exports because they were no longer competitive, plus a fall in rubber export prices.

The economy grew 11% in the first quarter from the previous quarter and the Bank of Thailand said that this momentum had broadly carried over into the second quarter.

But economists said that even if domestic demand was healthy, helped by government spending, external demand seemed to be slowing more quickly than expected. The central bank therefore seems likely to leave interest rates low for now to help the recovery.

Meanwhile, Thailand’s main inflation rate likely held steady in May as business activity continued to recover from last year’s floods and wages increased, while state controls on certain goods and subsidies held prices in check.

The central bank is unlikely to change its neutral policy stance for now as inflation risks remain, although it suggested on Wednesday that there was room to manoeuvre if problems in the eurozone grew.

Annual headline inflation was expected to be 2.5% in April, littlechanged from 2.47% in April, according to the median forecast of 12 economists polled by Reuters. The April figure was the lowest since November 2009. But core inflation, which strips out more volatile energy and fresh food prices, probably eased to 2% from 2.13% in April.

Such a level would be the lowest since March 2011 and fall well within the central bank’s target range of 0.5%–3%, which it uses monetary policy to achieve.

However, inflationary pressures persisted as the impact of a jump in minimum wages – by 40% on average from April – and a price freeze on goods would eventually be passed on to consumers, economists said. — Reuters