With a surge in private consumption, Thailand's gross domestic product (GDP) was forecast to reach between 4% and 4.5% for the year.

But the conventional engine driving the Thai economy, the export sector, recovered in the second quarter and began to rev up in the second half of the year due to a rise in demand in major export markets and the government's policy of broadening non-traditional export markets.

As a result, exports in 2002 were projected to record growth in value of between 4% and 4.5%, following a revision of the 3.5% growth rate in the middle of the year.

By the end of 2002, the value of the country's exports was expected to be between US$68.8 billion and $69.1 billion, up from $66.1 billion in 2001.

The Commerce Ministry reported that official figures showed shipments in the first nine months of the year registered a value of $50.5 billion, a rise of 2.6% year-on-year.

Prime Minister Thaksin Shinawatra tours the One- stop Export Services Centre at the Export Promotion Department in mid-July with Commerce Minister Adisai Bodharamik (center) and Finance Minister Somkid Jatusripitak. The centre is designed to shorten the process of obtaining export clearance to between one and three one and three days from eight to 10 days previously.

Imports had a slight increase of 0.77%, to $47.5 billion, and the trade surplus rose sharply by 44.3% to $2.9 billion.

The outstanding year-on-year export figures in October represented a growth rate of 18.4% and the results in final two months were also expected to be encouraging.

Nuntawan Sakuntanaga, deputy director-general of the Department of Export Promotion (DEP), said initial forecasts of a poor export performance for 2002 had ben based on shipments in the first quarter, which contracted 6.4% year-on-year.

The value of shipments to the United States, Thailand's largest export destination dipped by 10.7% in the first quarter.

Meanwhile, other major markets, Japan and the European Union (EU) also saw declines of 12.2% and 17.4%, respectively, while Asean had weak growth of only 0.8%. As those markets accounted for nearly two-thirds of total export value, Thailand's export growth overall was poor.

Ms Nuntawan said the US market, which accounted for nearly one-fifth of Thailand's total export value, was fragile for most of 2002. But despite growing concern about a war between the US and Iraq and corporate scandals such as the demise of Enron and WorldCom, American consumers continued to keep spending strongly.

She pointed to the US consumer confidence index which rebounded in November to 84.1 points, from a nine-year low in October, due to signs of a recovery in the job market, rebounding stocks and the Federal Reserve's interest rate cut.

That reflected a sense that consumer confidence was returning, although more slowly than the market had anticipated, she said.

Shipments from Thailand to the United States in the first nine months of 2002 were worth $10.028 billion, a decline of 0.16% year-on-year.

However, the DEP anticipated that the US market for Thai exports would return to positive growth by the end of the year, due to a surge in consumer spending during the holiday season in the fourth quarter, and was expected to perform better than in 2001 when it recorded a contraction of 11%.

Top export products that slumped in the United States in 2002 included computers and components, apparel, electrical circuits, gems and jewellery as well as frozen shrimps.

The audio-visual segment, comprising video players and components doubled its export value by 108%, to $293 million, while television sets and components increased by 50% to $630 million, due to Malaysian investors relocating production bases to Thailand. This factor fuelled the growth of audio products in other markets, too.

The Japanese market, the second largest economy in the world, continued to stagnate. The contraction of 7.2% in the EU market was also not a surprise. Chicken and shrimp exports were limited in this market due to growing concerns about food safety.

The EU has strictly inspected all consignments of chicken and shrimps exported from Thailand since March, arguing that some shipments were contaminated.

The tighter inspection regime affected the performance of leading listed agribusiness concerns such as Charoen Pokphand Foods and GFPT Plc. With the stricter EU regulations, shares in agribusiness firms had shed 10.5% on the year to November, compared with a rise of 17% for the SET overall.

CPF reported sales revenue of 55.7 billion baht in the January-September period, an increase of 1% year-on-year. However, net profit dipped sharply to 2.33 billion baht.

The substantial decline in net profit stemmed from a 30% fall in the price of broiler chickens in the domestic market, as producers cut prices.

Food processing exporters continue to voice their concerns about the EU's tight restrictions on food exports.

That policy would continue to be a big hindrance next year, said Poonkeite Thangsombat, president of the Thai Food Processors' Association.

``We do not worry too much about a possible US-led war with Iraq because people would still need to eat, but we are concerned about restrictions on food imports in the US and the EU markets,'' said Mr Poonkeite.

Among the four traditional markets, only Asean, principally Brunei, Indonesia, Malaysia, the Philippines and Singapore, showed growth, around 6% this year to $10 billion.

Intra-Asean trade has increased significantly in recent years mainly due to tariff elimination under the Asean Free Trade Area (Afta).

Ms Nuntawan said the satisfactory export growth this year was due partly to the government's policy of promoting trade in non-traditional markets. In the January-September period, earnings rose by 10% year-on-year to $17 billion. The new markets currently account for 34% of total value compared with 16% the year before. The Department of Export Promotion aims to lift the combined share of these markets to 40% of export earnings in 2003. The new target destinations include Indochina, the Middle East, Africa, Latin America, Eastern Europe, South Asia and China. China was the biggest growth market for Thailand's exports with a rise of 12.9% in the first nine months of 2002 and a value of $2.3 billion, up from $2.1 billion in the same period in 2001.

Several top export goods had double- digit growth including computers and components, plastic pellets, chemicals, steel and steel products. Some export items grew by more than 100%, including motors and electrical generators as well as hides and tanned leather. Ms Nuntawan said the department had set aside about one billion baht per year to promote Thai products in international markets, in particular non-traditional markets. To broaden export markets, the Thaksin administration has aggressively pursued bilateral free trade agreements with the aim of boosting trade. Target countries include Bahrain, India, China, Russia, Australia and the United States.

Charl Kengchon, the vice-president of Thai Farmers Research Centre, attributed the export recovery to the government's policy of export market diversification.

He said the strategy had minimised the risk of too heavy a dependence on conventional markets. Dr Charl said the prospects in the coming year depended heavily on external factors such as the threat of a possible US-Iraq war and consequent oil price increases.

``Of course, these would all be critical factors influencing the outlook for Thai exports and the global economy next year,'' he said.

Dr Charl predicted, however, that there was a high probability that any Middle East war would be limited and that the US, together with its allies, could wage a war that would not last longer than six months. Any war would raise oil prices but prices would eventually decline once a war ended, he said.

Although external factors were unfavourable for the export sector, internal factors had supported Thai exporters. The baht was stable at 43 to 44 baht against the US dollar and inflation was around 0.8%, both factors contributing to the competitiveness of Thai exports.

Dr Charl said that although the baht was relatively stronger at different times during the year, it did not have a significant impact because it strengthened in line with other currencies in Asia.

Another piece of good news for the export sector was that export prices did not fall significantly. According to the DEP, in the second half of 2002, the prices of some export products had picked up, mainly value-added products, including jewellery, processed shrimps, canned and processed vegetables, plastic products and pellets, glass for construction, medical equipment, and steel and steel products.Products that faced falling prices were air-conditioners and components, frozen chicken, frozen vegetables, toys, leather goods, cosmetics and pharmaceuticals.

These products faced a price-war in the international market.

With the uncertainty in the globaleconomy in the coming year, however, Dr Charl offered a conservative export growth target of of 1-2%.

EYE ON JAPAN

Virtual stagnation in the Japanese economy, he said, would pose another risk next year for Thailand's export sector. ``If Japan fails to fix its chronic bad debt problem, that will affect employment and the purchasing power of the Japanese,'' he said.

However, China's growing economy is expected to be a positive factor in Thailand's export growth in the next year. The Chinese economy is on track to grow 7% this year and at a sustainable rate over the next few years.

Recent expansion at BMW Group's Rayong plant will double output to 60,000 cars in near term as exports improve.

More good news for the export sector is that the global high-tech industry is forecast to grow by more than 5% in 2003, compared with forecast growth of 2.3% in 2002.

The US-based International Data Corp's survey, released late in 2002, said that the year had featured the worst downturn on record for the global information technology industry.

Thailand's computer and component exports accounted for 11% of its total export value, a fall of 8.3% year-on-year, to $5.4 billion in the first nine months. Electrical circuit exports accounted for 5% of total value, a fall of 9.5% to $2.4 billion.

Thai Farmers Research Centre predicts that several key export goods have a promising outlook, including rice and rubber, due to increased demand in the global market, although global output may decrease.

Meanwhile, the centre forecasts that labour intensive export goods such as apparel, artificial flowers, toys and leather goods, would have to work hard to maintain their competitiveness in the face of tough competition in the international market, in particular, from China's cheaper goods.

Consumer purchasing power in Thailand's main export markets may also be depressed in line with the slowdown in their economies. Both frozen and processed shrimp products may have another tough year because of intense competition in the US market.

In addition, the US bio-terrorism law, a response to the Sept 11 events, would impose stricter inspection procedures and standards on food imports. Ms Nuntawan remains optimistic, however, that although the situation would be tough in 2003, Thai exporters could compete successfully in markets abroad.

She said local businesses increasingly recognised, particularly since the baht devaluation in mid-1997, the need to add value to products.