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Prakash Sakpal, economist at ING, points out that Thailand’s external trade swung back to growth in July after several months of contraction this year as exports rose by 4.3% year-on-year and imports by 1.7%,   against consensus estimates of a 2% and 6% contraction respectively.

Key Quotes

“Positive swing in exports from 2.9% YoY fall in June rather tells us more about what happened a year ago – a low base effect from a big month-on-month (MoM) fall in July 2018, while key drivers of automobiles and electronics with a combined weight of about 30% continued to hold down the headline export growth. Electronics were down by 5% MoM and autos and parts by 2.5%.”

“But even bigger positive swing in import growth, to +1.7% YoY from -9.7% in June, lift hopes of some recovery in domestic demand. Growth of all key import segments – fuel, raw materials, capital goods, and consumer goods – improved, though this was also associated with a sharp narrowing of the trade surplus to $110 million in July from $3.2 billion in the previous month.”

“Data puts year-to-July export growth at -1.9% and import growth not far apart from that at -1.8%, down sharply from +11.1% and +9.5% in the same period of 2018. But the $4.1 billion of cumulative trade surplus through July was little changed from a year ago to sustain positive sentiment toward the Thai baht (THB).”

“Just as with trade growth, we see a favourable base year effect preventing further slippage in GDP growth in the rest of the year from a 5-year low of 2.3% YoY in 2Q19.”

“While we expect the BoT to cut rates again this year, at least by 25bp, if not more, hopes also remain pinned on fiscal stimulus.”