UPDATE 1-Floods blamed as Thai output fell in March, but hopes high

Fri Apr 27, 2012 3:37am EDT

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(Adds details, economist's comment)

* March output -3.17 pct y/y vs f'cast -0.5 pct

* Output falls for 7th month after floods in late 2011

* Ministry sees output up 6-7 pct in 2012

* Economists expect no change in policy rate next week

By Orathai Sriring and Boontiwa Wichakul

BANGKOK, April 27 (Reuters) - Thai factory output fell a bigger-than-expected 3.17 percent in March from the year-earlier month as the impact of last year's floods on industry persisted, but the government still predicts output will rise 6-7 percent this year.

The Industry Ministry expects major flood-hit industries to be back to normal around the middle of the year, and economists said the central bank will likely keep interest rates low to support the recovery.

"We think our major industries will recover 100 percent around June as more than half are fully back now," Verasak Supprasert, a specialist at the ministry's Office of Industrial Economics, told a news conference.

Output dropped 3.17 percent in March after a revised 3.16 percent fall year on year in February. A Reuters poll had forecast a fall of 0.5 percent in March. Compared with February, output rose 11.5 percent..

Output plummeted 47 percent in November from the year-earlier month as the worst floods in decades hit auto and electronics firms. It fell 9.3 percent for the whole of last year.

Thailand is a regional hub for the world's top car makers, and the world's number two producer of hard disk drives.

Verasak did not say when annual output would return to growth after shrinking 7.1 percent in the first quarter.

NO SMOOTH SAILING

Output is expected to remain weak in coming months, weighing on exports, as industrial goods account for about 65 percent of total shipments.

Customs data showed exports unexpectedly fell 6.5 percent in March from a year earlier, while imports surged 25.6 percent, producing a record trade deficit of $4.6 billion, due to the floods and faltering global demand..

"Taken together, this is a clear indication that the road to normalcy is not going to be as smooth-sailing as some had earlier expected," said Gundy Cahyadi, an economist at OCBC Bank in Singapore.

The Bank of Thailand has said production may only get back to normal in the third quarter of this year. It predicts exports growth of 7.8 percent, but the Commerce Ministry forecast a 15 percent rise.

The central bank left its benchmark interest rate THCBIR=ECI unchanged at 3.0 percent at its last meeting on March 21 after cuts at the previous two meetings..

Economists expect no change in the policy rate at the BOT's review on May 2, and perhaps all year.

The economy grew just 0.1 percent in 2011 due to the floods, but the central bank expects it to expand 5.7 percent this year due to spending and reconstruction.

The Finance Ministry estimated economic growth of 2 percent in the first quarter year-on-year.

Porametee Vimolsrir, deputy secretary-general of the National Economic and Social Development Board, told Reuters on April 11 the economy probably saw double-digit growth in the first quarter from the previous three months, when it suffered a contraction of 10.7 percent..

The board, which complies GDP data in Thailand, forecast economic growth of 5.5-6.5 percent for 2012. It is due to release first-quarter GDP data and its new forecasts on May 21. (Editing by Nick Macfie)

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