Thailand's exports to dip 10.6%

Blame it on base effects.

According to DBS, for May, it expects Thailand's exports and imports to contract by 10.6% YoY and 7.2% YoY respectively, largely on account of base effects.

Here's more:

The outperformance of the domestic economy is starting to show in the custom trade numbers with importsstaying elevated relative to exports. Notably,the rolling 12-month trade balance deteriorated from a surplus of USD 3bn in September 2011 to a deficit of USD 22bn in April.

Over the time period, manufactured goods exports were generally weak even though supply side effects from the floods of late 2011 have essentially dissipated by 2H12. In level terms, manufactured products fell to their lowest point in a year at USD 13.1bn in April amid lackluster external demand.

Meanwhile,the import of capital goods remains high relative to the pre-flood period despite a slight easing in the more recent 2-3 months.

Going forward, we maintain that domestic demand islikely to be well supported. Although, there have been plans by the government to scale down on its rice pledging scheme (through lower guaranteed prices), the authorities have indicated thatt his program is set to be in place until 2017.

Continued consumption stimulus and the ramp up of public sector investment in the coming months are likely to put downward pressure on the trade balance and a larger deficit cannot be ruled out if the global economic recovery does not gain traction.