2012 Industrial Recap and 2013 Outlook The Thai economy expanded by an impressive 6.4% in 2012, despite the impact of the 2011 flooding and economic slowdowns in several of Thailand's major trading partners, particularly the countries of the European Union. As the first quarter of 2013 drew to a close, the Ministry of Finance increased its 2013 GDP growth projection to 5.3%, and the Bank of Thailand has signaled that it will increase its 2013 outlook from the earlier projection of 4.8%. The country's exports set a new record in 2012, with total exports of slightly more than US$229.5 billion, approximately 3.1 percent higher than in 2011, despite the financial crisis and concomitant economic slowdown in major trading partners' economies in Europe and the impact of the 2011 flooding on overall production. Indeed, by August 2012, an estimated 90-95% of factories in flood-affected industrial estates/industrial zones/industrial parks were operating normally, which supported Q4/2012 growth and portends well for both exports and the Thai economy as a whole in 2013. The Ministry of Industry's Office of Industrial Economic recently published its 2012 Annual Report, which looked at performance in the first 10 months of 2012 and provides an outlook for many of the country's economic sectors in 2013. Motor Vehicle Industry During the first 10 months of 2012, the automotive industry expanded continuously, enjoying a growth of 48.03% compared to the same period the previous year. This was due to the acceleration of production to meet customer demand, coupled with favorable factors from the first car policy and introduction of more new cars into the market.
By year-end, Thailand had become the #9 vehicle assembler in the world, and several new large-scale investments have been announced in 2013. Production for domestic distribution is expected to account for 50-55% and production for export would account for the remainder. Car manufacturers expedited production primarily to meet domestic demand due to the expiration of car reservations and the deadline for filing requests for entitlement in the first car policy. During the first 10 months of 2012, motorcycle production increased compared to the same period the previous year because motorcycle manufacturers accelerated production to meet consumer demand, together with the introduction of new motorcycles to the market offering more alternatives to consumers. Data from the production plans of motorcycle manufacturers estimate that in 2012, the production volume of motorcycles will be over 2,436,718 units, with a domestic distribution of 85-90% and exports of 10-15%. Electrical Appliance and Electronics Industry in 2012 Overall, business restoration after the flooding in late 2011 resulted in a decline in production and exports. Additionally, the global economic conditions, which are still recovering, resulted in reduced foreign purchase orders, especially from the EU. One notable exception was the US where there has been an increase since 2011 due to their improving economic conditions. Nevertheless, the electrical appliances industry benefited from domestic economic factors aimed to stimulate domestic sales of electrical appliances and experienced growth compared to 2011. In 2013, the electrical appliance and electronics industry is expected to grow by 3% due to increased domestic demand from the government's economic stimulation policies to increase domestic purchasing power. Meanwhile, exports are declining because of the world economy, which still poses relatively high risks.
Food Industry During 2012, the overall outlook for the food industry was a slowdown due to reduced orders and concerns relating to the situation in the EU, Thailand's major market for food products. Although sugar stocks in the global markets increased, India and Brazil faced the problem of lower production due to heavy rains. So even though their exports are expected to lower, sugar prices should remain stable. For livestock, especially processed chicken, demand from abroad, especially Japan, continued to increase due to lack of consumer confidence from the radioactive contamination of local food from the explosion of the nuclear power plant the previous year. The abolishment of the import ban for chilled and frozen fresh chicken due to avian flu by the EU prompted increased chicken exports from Thailand. However, products with decreased production were vegetable oil products and tapioca due to the impacts from natural disasters, resulting in lower production and directly impacting the increased price according to increased demand in global markets. In 2013, production and exports are expected to increase slightly since prices of agricultural products increased following drought in the US, where prices of agricultural products were pushed up. The announcement of phase 3 of the economic stimulus scheme together with the US presidential election spurred the US domestic economy, which may in turn help Thailand's exports to increase. However, the decrease of raw materials in agricultural areas affected by natural disasters, and negative factors such as unpredictable natural disasters, including the movement of oil prices with a tendency to increase, the slow economic conditions in the importing countries due to the public debt crisis in the EU which has started to impact other markets, including various trade barriers such as environmental measures which are now going into effect, especially the labeling of carbon footprints for products sold in the EU, may cause Thailand's overall production and exports of the food industry to be unable to adjust very much. Rubber and Rubber Products Industry In 2012, the rubber and rubber product industry started to improve, especially rubber tires, in line with expansion of the automotive industry. Even though exports of primary processed rubber declined due to the economic crisis in the EU and USA, resulting in decreased demand for rubber products, the overall rubber and rubber product industry still continued to grow from major supporting factors. Countries where the automotive industry continued to grow -- India, Vietnam and Brazil -continued to have high demand for rubber, including the expanding ASEAN markets. Hence, the export of rubber and rubber products was not overly affected.
For 2013, the rubber and rubber product industry is forecast to expand, especially rubber tires, in line with continued growth of the automotive industry. For rubber gloves/inspection gloves, reduced imports due to the slowdown in major markets such as the EU was compensated for by expansion in the ASEAN markets. Countries where the automotive industry continued to grow -- India, Vietnam and Brazil -- continued to have high demand for rubber. This is a very important supporting factor in that it can buffer negative impacts to the industry. In addition, the FTA agreement framework also helps in expanding the export of rubber and rubber products. The trend for rubber prices in 2013 continues to fluctuate. Important factors adversely affecting rubber prices are trading prices in the futures market and decreased oil prices, including the economic crisis in the EU and US, resulting in low rubber consumption. Hence, the price of rubber decreased continuously. Plastics Industry The plastics industry in 2012 is forecast to grow 3.53%, consistent with improved domestic economic conditions. Exports are expected to grow slightly, by 2.46%. An increase in domestic investment would result in continuous growth of imports. In 2013, the plastics industry is forecast to experience improved growth rates compared to 2012, the key factor being expansion of the domestic economy. Petrochemicals Industry The trend for the Thai petrochemical industry in 2012 is toward reduced growth compared to 2011. The main factors are most likely to be economic conditions in Thailand and its major export partners, namely China and Japan, both of whose growth rates have declined. This has resulted in low growth rates for the export and import of Thailand's petrochemical products. In 2013, however, the petrochemical industry is expected to experience increased growth, consistent with the expansion of intermediate and downstream industries, the plastics and automotive industries. For 2013, the government has a number of measures to stimulate the economy through investment in large projects, such as extension of the mass railway system, investment in the long-term water resource management plan, as well as improvement of the global economy toward a better direction due to implementation of QE3 measures by the USA (monetary injection into the economic system). These factors are expected to affect the industry's expansion. However, the prolonged debt crisis in the EU is still an important factor and will be closely monitored by the industry.
Paper and Pulp Industry The overall pulp, paper and printing industry grew in 2012, as domestic distribution increased following the slowdown the previous year. The export sector did not perform as well as expected for many reasons. As the global economy contracted, reduced purchase orders followed accordingly. The USA, the major importer of books and printed materials from Thailand, also deferred imports. Production costs increased in terms of raw materials and wages. Social networks are replacing paper, the material used to produce printed materials and journals, hence lower demand. On the other hand, corrugated cardboard for manufacturing product packaging is likely to increase consistently in line with the production sectors; for example, the food, electrical appliances, commodity products, cosmetics and drug industries. In 2013, overall production and exports of pulp and paper is expected to increase, both for fiber paper and paper. Participation in the ASEAN Economic Community in 2015, where Thailand will become the hub of printing, has prompted several producers to start planning for business expansion to support increasing demand resulting from increased foreign investment. Thai producers are also attempting to gain market share in neighboring countries such as Cambodia, Laos, Myanmar and Vietnam, whose printing market is not as mature as Thailand's. Cement industry In 2012, production volume and domestic distribution of cement is expected to expand compared to the previous year due to the demand from restoring the infrastructure damaged from the flood and anticipation for potential natural calamities in the future. There is also demand to satisfy economic expansion in both business and industrial sectors, coupled with the government policy to accelerate development of telecommunication systems in suburban areas, and the first house policy. These factors have prompted much investment in housing projects and condominiums along mass transit routes. All of these factors resulted in increased demand for domestic cement compared to the previous year. Cement exports are expected to expand in 2012 because ASEAN countries, Thailand's major export markets, and non-Asian markets, which are mostly developing countries with continued to have a high demand for cement in various infrastructure development programs to support their economic expansion. Thailand's major export markets in 2012 were Myanmar, Cambodia, Bangladesh, Laos, Togo and Indonesia. Cement production and domestic distribution in 2013 is expected to expand. Supporting factors include economic stimulus policies, infrastructure investment by the government sector, expansion of investment in the real estate business to support mass transit routes and expansion of telecommunication networks to suburban areas. In addition, cement exports in 2013 are expected to grow very well since Thailand's major export markets are developing and require high volumes of cement for construction to support their economic expansion.
Ceramics Industry Production and distribution of ceramics increased in 2012, including floor and wall tiles and sanitary ware, as a result of the recovery in the domestic real estate sector. Exports also increased due to the expansion of ASEAN markets, which more than offset declines in the EU and US markets. In 2013, production and distribution of ceramics is expected to increase due to expansion of the domestic real estate market. Exports of ceramic products in 2013 are expected to increase mainly from the expansion of ASEAN markets. Iron and Steel Industry Production volume of primary iron and steel products in 2012 was approximately 6,763,387 metric tons (excluding semi-finished iron products, coldrolled flat sheets, coated steel, and pipe & tubing to avoid double counting). Cold-rolled flat sheets had the highest increase at 13.35% because the automotive industry was the major consumers, enjoying a large growth in production as the result of the government's first car policy. This was followed by other coated steel products with a 12.02% increase, and galvanized sheets with a 6.90% increase. The largest declines were seen in semi-finished iron products at 21.94%, followed by hot-rolled flat sheets experienced a decrease in production of 6.13% due to higher competitive conditions in the global iron industry. The outlook for the iron and steel industry in 2013 in flat products, especially those products used in the automotive industry, is for increased production and domestic demand. Long products in 2013 are expected to remain unchanged since the real estate sector found that various projects, from the public and private sectors, remained unchanged. As such, the outlook for production of and domestic demand for long products will also remain unchanged. Pharmaceuticals Industry Drug production in 2012 increased from the previous year, from the acceleration of production during the first half of the year to covering the deficit caused by the previous year's flood crisis in many areas. As a result, manufacturers were unable to produce or could not fulfill the orders. In addition, manufacturers also produced new generic medications as an alternative in the highly competitive market. Exports are expected to grow because manufacturers were successful in penetrating new markets and maintaining focus on existing markets. In 2013, production and domestic distribution is expected to increase from the previous year. The export value is also expected to increase. Not only were Thai manufacturers successful in finding new markets and expanding existing markets, foreign investors from the USA, EU and Japan were also interested in becoming partners with Thai manufacturers for using Thailand as the base of drug production and marketing in the ASEAN region, to support entry into ASEAN Economic Community in the near future.
Gems & Jewelry Industry In summary, overall production of the gems and jewelry industry in 2012 is expected to decrease by 3.13% compared to 2011 consistent with the sluggish US and EU economic conditions.
Overall exports of gems and jewelry in 2012 are expected to increase by 15.19%. The major export markets were Switzerland, USA, Hong Kong and India. The increased export value comes from the export of diamonds, precious stones, genuine gold jewelry, artificial jewelry, synthetic gems and unwrought gold. Production trends for 2013 are expected to remain unchanged until economic resolution is realized in the US and EU. This situation must be monitored further. In terms of exports, positive factors include increased demand for gems and jewelry products, as some consumers buy diamonds and unwrought gold during weak economic periods as low risk investments; the ASEAN and Japanese markets are expected to grow well. The biggest negative factor is the economic slowdown. However, as the positive factors are expected to outweigh the negative factors, exports in 2013 are expected to increase.