The worst may be over: senior finance official

The pace of economic contraction decelerated last month following a sharp year-on-year fall of 7.1 per cent in the first quarter, said Somchai Sujjapongse, director-general of the Fiscal Policy Office.

He pointed to the slower rate of contraction in the Industrial Production Index, which fell by 12.8 per cent year on year in April, against March's drop of 17.7 per cent.

After seasonal adjustment, the April index expanded by 5.7 per cent from the month before, resulting in three consecutive months of month-on-month expansion, following 2.1 per cent and 2.4 per cent and in February and March, respectively.

Rising exports of food and chemical products to Asia, particularly to China and India, contributed to the increase in production, Somchai added.

Production of food items like tuna, frozen chicken and shrimp rose by 2.4 per cent last month, following a 0.7-per-cent rise in March. Production of chemicals fell by 0.1 per cent, compared with a drop of 1.7 per cent in March.

Production of electrical home appliances contracted 30.1 per cent, against a fall of 40.5 per cent in March. Production of electronics items also fell at a slower pace, by 4.2 per cent against 7.5 per cent in March.

The increase in production had been caused by a running down of inventories in the global market, resulting in importers beginning to place more orders with Thailand's manufacturing sector.

"However, we don't know whether this initial recovery will sustain itself, as it will depend on world economic conditions," said Somchai.

If the current signs of a global economic recovery are sustained, then it would also pull the Thai economy out of recession, he said.

The local economy has entered recession after two consecutive quarters of quarter-on-quarter contraction. Gross domestic product in last year's fourth quarter shrank 6.1 per cent from the previous quarter, while GDP in the first quarter of this year contracted 1.9 per cent from the previous three months.

Somchai said private investment and consumption were still very weak last month. Value-added tax receipts - a key consumption indicator - fell by 17.7 per cent year on year, against a drop of 17.5 per cent in March.

Taxes collected from home and other property sales dropped by 1.7 per cent, indicating falling private investment in the real-estate sector. Imports of machinery were down by 23.3 per cent last month, marking the fifth straight month they had fallen.

Meanwhile, the unemployment rate was 1.9 per cent in March, the same as the month before.

Somchai suggested the government should spend more money to boost growth. Implementation of the first phase of the second stimulus package is crucial, he said, referring to the government's currently stalled executive decree for raising Bt400 billion in additional funding.

Political stability is also crucial if there is to be an economy recovery, while the baht must also remain competitive, he said.

"If these conditions are met, economic growth will be positive in the fourth quarter," he added.