By Orathai Sriring and Kitiphong Thaichareon
BANGKOK, June 28 (Reuters) - Thailand's exports fell in May from a year before and domestic demand was weak as a big government stimulus scheme wound down, central bank data showed on Friday, suggesting the economy is slowing and interest rates should stay low to support growth.
A big fall in foreign reserves showed the central bank was supporting the baht in the week to June 21, in line with its aim to smooth excessive volatility and help industry, which earlier this year had to cope with a jump in the currency.
The Bank of Thailand (BOTS) said exports, which are equal to more than 60 percent of the economy each year, dropped 5.1 percent in May from a year before after a rise of 3.7 percent in April.
'In May, the overall economy moderated in line with private consumption, which was affected by rising household debt and waning fiscal stimulus. Fragile global demand weighed on merchandise exports,' the central bank said.
Consumption was flat compared with April but eased 0.2 percent from May 2012, it said. Car purchases fell as a government scheme subsidising first-time buyers wound down, while households were more cautious about spending.
Private investment eased 0.7 percent in May from April and 3.3 percent from May 2012, reflecting falling spending on machinery and equipment following lower imports plus base effects from post-flood construction last year, it said.
Earlier on Friday, Industry Ministry data showed factory output slid 7.8 percent in May from a year before but rose 10 percent from the previous month. In April, output fell a revised 4.2 percent on the year and about 19 percent from March.
However, overall capital utilisation was 65.8 percent in May, up from 60.2 percent in April, when factories closed for the long Thai holiday of Song.
Industrial goods account for about 65 percent of total shipments. Thailand is a regional hub and export base for global car makers and the world's number two maker of hard disk drives.
RATES TO REMAIN LOW, BAHT WEAKENS
Given global uncertainty, economists think the Boy's monetary policy committee (MPC) should keep interest rates low for now after a May 29 cut.
July is 'too early for the committee to make another cut as they will need to look at more incoming data,' said Thammarat Kittisiripat, an economist with TM Bank.
However, some feel conditions already justify another cut.
Capital Nomura Securities said in a report that May data suggests GDP growth for the second quarter might not reach 4 percent year-on-year' and supports its forecast there will be another 25 basis point cut at a July 10 policy meeting.
On May 29, the MPC cut the policy rate by a quarter point to 2.50 percent after weak gross domestic product data backed government calls for a cut.
The government had been pushing for lower rates to help deter hot money inflows that pushed the baht to a 16-year high of 28.55 per dollar in April. It has since retreated on fears of government controls and capital outflows. On Friday, it was around 31.03/05, down 1.3 percent this year.
The central bank has said it will act only to ensure currency stability and will not resist the market trend.
In the week to June 21, foreign reserves fell to $172.8 billion from $176.5 billion the previous week. BOTS Assistant Governor Pong pen Ruengvirayudh said that was due to the central bank's 'dollar selling plus lower gold prices'.
The BOTS has said it would cut its 2013 economic growth forecast from 5.1 percent following a weak first quarter, when GDP shrank 2.2 percent from the previous three months.
On Thursday the Finance Ministry lowered its 2013 growth projection to 4.5 percent from 5.3 percent as domestic demand slowed. The state planning agency forecasts 4.2-5.2 percent.
(Additional reporting by Boontiwa Wichakul and Pairat Temphairojana; Editing by Alan Raybould and Richard Borsuk) Keywords: THAILAND ECONOMY/TRADE CONSUMPTION
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