Thailand: Manufacturing production plunges in November due to floods
December 30, 2011
In November, manufacturing production plunged 48.6% over the same month the year before, which followed the already steep 30.1% decline recorded in October (previously reported: -35.8% year-on-year). The decline was the sharpest seen since January 2000. The contraction was broad-based and reflected the impact of the floods that hit the country in October 2011 and swamped various industrial states, as well as Bangkok itself. Manufacturing of electronics as well as the production of motor vehicles suffered the largest declines, while other auto-related industries, such as rubber and plastic were also affected. Thailand produces about a quarter of the world's hard disk drivers and also serves as a production hub for Japanese car makers and electronics firms. On a month-on-month comparison, manufacturing output contracted a seasonally adjusted 25.3% over the previous month, which followed an equally sharp 29.5% decline in October. The monthly drop, together with the October figure, represents the steepest decline seen since records began. As a result of the monthly drop, the annual average variation in manufacturing production fell from minus 3.1% in October to minus 7.6% in November, which marks the third consecutive month in which the index remains in the red and the steepest decline since December 2009. As the flood waters started to retreat in December, however, it is expected that the Thai manufacturing sector will now experience a protracted recovery. Meanwhile, the Finance Ministry estimates that the economy has grown only 1.1% in 2011, as the flooding has taken its toll on economic activity. However, the Ministry anticipates that economic growth will bounce back to 5.0% in 2012, boosted by government spending on post-flood reconstruction. The Bank of Thailand expects the economy to have expanded 1.8% in 2011, and sees economic growth at 4.8% for 2012.
Author: Ricardo Aceves, Senior Economist