Thailand’s Exports Sag, Factory Output Shrinks

BANGKOK—Thailand reported lackluster export activity and lower industrial output in the first quarter, in the latest signs that months of political wrangling has hurt the country’s economic prospects.

The export-reliant nation saw its overseas shipment slide 1% in the January-to-March period from a year earlier, according to Commerce Ministry data released Monday.

Factory output in the first quarter contracted 7%, marking a 12th month decline, the Office of Industrial Economics reported. The slowdown in manufacturing activity was most pronounced in autos, electronics and appliances.

Weak economic data show that the political unrest is taking a toll on the economy, said Amonthep Chawla, head of economic research at CIMB Thai. “Investors still want to wait until political uncertainties clear up before putting in a new investment,” Mr. Amonthep said. “Recovery may not begin until the third or final quarter of this year. We’re looking at a slow growth phase in Thailand.”

Months of anti government protests aimed at ousting Prime Minister Yingluck Shinawatra have strained business confidence. Now in its sixth month, the political conflict has weighed on domestic demand and delayed public spending since the country has been without a fully-functioning government since Ms. Yingluck dissolved the lower house last December. The Feb. 2 general election was nullified by a court last month and it remains unclear when a new election will take place to form a new administration.

“Domestic demand is running colder than we had previously anticipated, while the boost from the recovering export-facing sector is a touch softer than initially thought,” Fred Gibson, an economist at Moody’s  Investors Service, said in an email.

The Bank of Thailand expects growth in the first three months of 2014 to contract from the final quarter of last year. The central bank expects economic growth this year to come in below 2.7%, almost half of a previous projection of 4.8% made late last year.

Weakening supply-side data points to a rising probability of a negative gross domestic product in the first quarter, Bangkok-based Tisco Financial Group  wrote. However, Tisco said it expected export growth to gradually improve, especially to developed markets thanks to recent economic improvement.

The Commerce Ministry was optimistic about the prospect of exports recovering in the second quarter, but noted that political uncertainty was a negative factor on export growth.

The Bank of Thailand kept it policy rate unchanged at 2% at its policy meeting last week, citing political uncertainties as an obstacle to the economic recovery.