UPDATE 3-Weak April export, output data shows Thai army faces tough test
(Recasts, adds details and comments)
* Exports in April -0.87 pct y/y, imports -14.5 pct y/y
* April factory output -3.9 pct y/y vs -6.4 pct in Reuters poll
* Annual output falls for a 13th consecutive month
* January-April output -6.36 pct y/y, exports -0.97 pct y/y
By Orathai Sriring and Kitiphong Thaichareon
BANGKOK, May 28 (Reuters) - Thailand's trade shrank in April and factory output fell for a 13th straight month, underscoring the damage political unrest has caused and the tough job the new military government faces reviving an economy that contracted in the first quarter.
The army, which seized control of the country on May 22, has begun a battle to re-start government spending and lift domestic demand in a bid to keep Thailand from falling into recession with a second straight quarterly contraction.
Based on the April data released on Wednesday - which included a 0.9 percent fall in exports from a year earlier - avoiding recession "remains challenging", said Tim Condon, regional economist for ING in Singapore.
But he is hopeful the new government can get delayed state projects on track and put "some vigour in domestic spending".
In January-March, the economy shrank 2.1 percent from the previous quarter. Since the political crisis began in November, Thailand's traditional growth engines have sputtered, and the April data did not offer encouragement they can gear up quickly.
Imports fell 14.5 percent from a year earlier, according to the Commerce Ministry, less than the 18.2 percent drop projected in a Reuters poll. But imports remained weak - and many of Thailand's imports go into finished goods later exported.
For April exports, the poll forecast a 0.5 percent increase. Thailand had a trade surplus in March, but April brought a $1.45 billion deficit, more than twice the forecast.
Industrial output in April was 3.9 percent lower than a year earlier, the Industry Ministry said. That compared with March's revised drop of 10.5 percent and a 6.4 percent decline seen in a Reuters poll.
The 13-month streak of annual declines in output is the longest since Industry Ministry data become available in 2001.
While the military coup may have eased fears of an imminent escalation in violence, it is not clear how the junta plans to install a properly functioning government given Thailand's deep political divide.
Rating agency Fitch said last week that if a roadmap for political stabilization is not in place within a month or two, there could be more lasting damage to the economy, which could be negative for Thailand's sovereign credit rating.
Though the Thai economy and its financial markets have proved fairly resilient to past military coups, HSBC analyst Frederic Neumann said in a column this week that "such resilience masks a darker reality: the Thai economy is falling behind its regional peers, its competitiveness is sputtering and growth is increasingly driven by debt, not productivity."
Thai exports, which account for more than 60 percent of gross domestic product, have been weak even though the political crisis has not disrupted factories or ports.
Exports in January-April were 1 percent lower than a year earlier, but the Commerce Ministry insisted on Wednesday that they can still rise 5 percent for all of 2014. Like many of its export-reliant Asian neighbours, Thailand is counting on improved demand from the United States and Europe.
In April, factories' capacity utilisation was 56.6 percent, the lowest since December 2011 when there was severe flooding.
TACKLING ECONOMIC PROBLEMS?
Tourism, which accounts for about 10 percent of the economy, has taken a hit. Consumer confidence is at a 12-year low, weaker than after the bad floods of late 2011, violent political unrest in 2010 and a deadly tsunami in late 2004.
Growth forecasts have been cut steadily since November. But some economists say the outlook could improve now that the military council started paying money owed to rice farmers.
Thailand can avoid slipping into recession in the second quarter given the junta's actions to support the economy, said Pimonwan Mahujchariyawong, economist with Kasikorn Research Center.
"The military council is trying to tackle economic problems, such as the budget and rice payments to farmers, which means there will be nearly 100 billion baht put into the economy this quarter," Pimonwan said. "If there is nothing to interrupt their work, the second half will be better."
The output and trade numbers released on Wednesday were the first government data on April. Earlier, the Federation of Thai Industries said vehicle sales in April dropped 33.2 percent from a year earlier.
The vital auto sector has slowed since mid-2013 following the end of a state subsidy for car purchases, when sales surged. The unrest has added to carmarkers' problems and more than 30,000 jobs have been lost this year.
The Thai unit of Honda Motor Co said last week it has cut production at its Ayutthaya plant to 60 percent due to weak domestic demand, and voiced concern sales may fall short of its target this year.
The Japanese carmaker also has decided to delay by six months to a year the startup of a $530 million plant from its previously planned April 2015 date.
Economists are divided on whether the Bank of Thailand will cut rates further at its next policy meeting on June 18. At its last meeting on April 23, the central bank kept its policy interest rate unchanged at 2.0 percent. Some analysts think a rate cut is possible to boost growth while others say it would do little to help spending as confidence is low and household debt high.
Condon of ING said he thinks the change of a rate cut is increasing, as he expects the central bank to again cut its 2014 growth forecast.
But Pragrom Pathomboorn of KGI Securities in Bangkok, who earlier thought there will be a cut on June 18, now thinks there won't be one until mid-2015. He said the end of political disputes on the streets, declining risks and a re-start of growth engines should boost the economy in the second half of this year. ($1 = 32.6 Thai Baht) (Editing by Richard Borsuk)