ECONOMY

Imports slide amid low investor confidence

Thailand's current account surplus unexpectedly widened in January as sliding confidence curbed imports of machinery and consumer goods.

Official data released yesterday showed the surplus rose to $1.54 billion from $1.22 billion in December. The figure was the biggest since January 2000, and the third straight month above $1 billion. Economists had expected a $1-billion surplus.

''Imports slowed significantly as falling investments cut purchases of machinery and equipment,'' said Amara Sriphayak, senior director of the domestic economy department at the Bank of Thailand.

''Business confidence continues to drop on political concerns and a strong baht.''

Consumer and business confidence have declined amid policy reversals and political squabbles in the military-installed government.

The central bank's Monetary Policy Committee is widely expected to cut interest rates for a third time this year when it meets on April 11 to buoy growth and try to limit gains in the baht.

''Confidence must be restored to bring back investments and consumption to boost imports,'' said Isara Ordeedolchest, an economist at Tisco Securities. The surpluses were putting more pressure on the baht, he added.

The currency has climbed 1.3% this month and 2% this year on speculation that exporters are increasing demand for baht as demand for dollars to buy imports slides. The currency surged 16% against the US dollar last year.

The current account balance comprises the difference between exports and imports of goods, services, investment income and remittances. About $700 million of January's surplus came from the service and transfer account, which is mostly tourism earnings, Mrs Amara said.

The trade surplus, based on a balance-of-payments basis, widened to $808 million from $732 million in December, the central bank said. Exports in January increased by 17.8% from a year earlier to $10.4 billion. Imports rose 4%, the slowest since June, to $9.57 billion, the report said.

Manufacturing production in February expanded 5.5% from a year earlier, slowing from 8.4% growth in the previous month. Output was expected to increase 4.5%, according to 12 economists in a Bloomberg survey. Factories in Thailand used 73.5% of their capacity in February, from 76.3%.

''With slowing overseas demand and the stronger baht, most manufacturers are cutting their production to avoid excessive inventory buildup,'' said Mr Isara.

The gauge of business sentiment fell to 42.9 in February from 43.9 in January. The private investment index, measuring items such as cement sales, imports of capital goods and licensing of new factories, declined 1.8% last month, compared with January's 0.8% drop.

The private consumption index, comprising electricity use, imports of consumer goods and gasoline sales, retreated 1.2% in February, the central bank said.

Tourist arrivals last month rose 6.4% from a year earlier to 1.26 million, from 1.29 million visitors in January.

The consumer confidence index, meanwhile, fell for a fourth month in February, dropping to a six-month low. The gauge has declined for 15 of the past 17 months, gaining only in September and October of last year.BLOOMBERG

Bangkok Post

Saturday March 31, 2007