Thai factory output dropped for the 12th month in March, a worse run than in the 2008/09 global financial crisis, and some economists say recession is possible with a caretaker government unable to provide much stimulus and exports remaining weak.

Thailand has endured six months of political turmoil as protesters seek to topple Prime Minister Yingluck Shinawatra and the central bank has warned it will cut its 2014 growth forecast again, with GDP probably shrinking in the first quarter.

Industrial output in March fell 10.41 percent from a year earlier, the Industry Ministry said on Monday. That compares with the 8.2 percent decline forecast in a Reuters poll and a revised 4.7 percent drop in February.

Exports, the bulk of which are industrial goods, fell 3.12 percent in March from a year earlier, the Commerce Ministry said, worse than the estimate of a 1 percent dip in a Reuters poll. Shipments had edged up 2.4 percent in February.

Imports slumped 14.19 percent, boding ill for exports as many imported materials go into assembled goods and are shipped out again. Helped by the weakness of imports, there was a trade surplus of $1.46 billion on the month.

Pimonwan Mahujchariyawong, an economist with Kasikorn Research Center, expected the economy to contract 1.8 percent in the first quarter from the previous three months.

“We may see positive growth in the second quarter, but we have to see whether exports are able to grow as expected. If not, it’s likely we will have a technical recession,” she said, meaning two consecutive quarterly drops in GDP.

She forecast 1.8 percent growth for the full year. The central bank’s most recent forecast is 2.7 percent but it has cut it several times since the political crisis flared up last November.

Markets were unfazed by the data, with the baht up slightly on fund inflows as Bangkok shares advanced.

Prolonged unrest has hit domestic demand, delayed public spending and scared away tourists from the capital.

“Needless to say, the key reason for potential growth downgrades is blamed on the unexpected delays in government expenditure, which accounted for a significant 10 percent of GDP in real terms in the last three years,” OCBC Bank economist Barnabas Gan in Singapore wrote.

He forecasts growth of 1.5 percent for 2014, down from his initial 2.8 percent.

Consumer confidence is at a more than 12-year low, weaker even than during the bad floods of late 2011, violent political unrest in 2010 and a deadly tsunami in late 2004. The Federation of Thai Industries (FTI) said on Monday its index of industrial confidence hit a 57-month low in March.

Overall capacity utilisation in industry in March was 64.3 percent, up from 58.9 percent in February. The Industry Ministry said the car sector, hard disk drives, petroleum, electrical appliances and canned frozen seafood were weak.

March vehicle sales tumbled 46.7 percent from a year earlier, data from FTI showed.

Risk of Recession

Tisco Securities economist Sarun Sunansathaporn forecast the economy would contract 0.4 percent in the first quarter from a year earlier and about 2 percent from October-December.

“That’s because of the political impact on everything - consumption, investment, tourism, government spending,” he said.

But he expected growth in the second quarter as tourism and exports should improve along with investment, with a newly installed Board of Investment set to approve investment pledges of about 660 billion baht ($20.4 billion) after a delay.

Sarun expects 2014 economic growth of 2.5 percent, in line with the IMF’s prediction. That would be the lowest in Asia.

Despite the risks to growth, the Bank of Thailand kept its policy interest rate at 2.0 percent last week. . Most economists do not expect further cuts for now, saying lower rates would do little to help the economy at a time of unrest, poor confidence and high household debt.

It’s not all doom and gloom. Siam City Cement, Thailand’s number two cement maker, said first-quarter net profit rose 56 percent from a year earlier, helped by exports, to neighbouring countries for big infrastructure projects.

Tourism outside Bangkok is holding up but arrivals still fell 5.85 percent in January-March from a year before. The Tourism Council of Thailand estimates cancellations will cut tourism earnings by 83 billion baht in the first half of 2014.

Airlines and hotels are suffering. “The industry has been affected by lower passengers because many foreign tourists avoid Bangkok,” Thai AirAsia CEO Tassapon Bijleveld said.

Five-star hotelier Erawan Group said its revenue probably fell 25 percent in the first quarter. It hopes for a better second half but sees revenue growing just 2-4 percent this year. (Reuters)