Weak import growth is a concern in Thailand

Import growth came in extremely weak at -26.2% (YoY) in September, slowest since 2009. While it may just be a one-off and partly distorted by the unusually high import figure in Sep14, it is nevertheless worrying. Imports of machinery were down by close to 20% in the month, while imports of consumption goods fell 7.9%. 

That domestic demand remains weak is clear to us. Private consumption growth is cruising below 3% (YoY) currently. Even if the government is aggressively spending to boost economic growth, bulk of the impact on private consumption is likely to be visible only in early-2016. As long as income growth stays flat, there seems to be nothing to propel consumption growth ahead. 

It is interesting to see what the Bank of Thailand (BOT) has in mind during next week's policy meeting. Trimming interest rates further to boost GDP growth may no longer make sense if the underlying demand in the private sector is weak. The government's more aggressive fiscal policy will help but, clearly, a time lag would be hardly surprising. 

But the BOT continues to prefer a softer currency. It is a little tricky when current account (C/A) surplus may be closer to 4% of GDP this year, up from 3.2% last year. Tourism receipts remain strong and demand for goods imports is weak. The central bank has already eased outward foreign investment restrictions for Thai residents this year. On this front then, the temptation to cut rates persists.