(Releads with trade figures, adds economists, background)
By Apornrath Phoonphongphiphat and Boontiwa Wichakul
BANGKOK, Jan 21 (Reuters) - Thai exports fell sharply for the second month in a row in December on weaker global demand, but a central bank official said low interest rates should help the economy avoid its first contraction in over a decade this year.
In line with dire exports data from rest of the export-dependent region, Thailand's exports fell 14.5 percent in December from a year earlier to $11.61 billion after an 18.6 percent drop in November.
"Demand from both new and major markets fell steadily, especially major markets, where demand dropped nearly 20 percent in December," Commerce Ministry official Siripol Yodmuangcharoen told a news conference following the data release. Exports to major markets account for half of total exports.
Economists expect Thai exports, which account for over 60 percent of gross domestic product, will not recover until the second half of 2009 at the earliest.
"The negative growth in December will make the 2009 target of the Commerce Ministry, which aimed for a rise of 3 percent in exports, challenging," said Capital Nomura Securities economist Nuchjarin Panarode.
"We expect exports to decline 6 percent this year and hope the global economy will start improving gradually in the second half," she said.
In 2008, exports grew 15.6 percent, the ministry said.
Exports from other Asian countries have also crumbled under the weight of the global economic crisis, with Taiwan's shipments falling 42 percent in December from a year earlier, the biggest drop on record. Singapore's non-oil exports fell 21 percent.
STILL GROWING
The economy is also struggling with a drop in business confidence after protracted political unrest last year. That culminated in a week-long closure of Bangkok airports by political protesters until Dec. 3, which depressed trade flows.
Imports dropped 6.5 percent to $11.26 billion last month, reflecting weakening domestic demand, giving a $350 million trade surplus for December after a deficit of $1.2 billion in November.
The ministry said exports to the United States fell 19.3 percent in December from a year earlier while those to Japan fell 15 percent and to the euro zone dropped 16 percent.
Exports to China, which accounted for 7.4 percent of the total, plunged 40 percent in December.
But the Bank of Thailand's chief economist said the economy was unlikely to shrink this year, thanks in part to recent official interest rate cuts.
The central bank cut its policy rate by a combined 175 basis points in December and January to a four-year low of 2.0 percent to ward off recession.
"After the policy rate cuts, major commercial banks have also cut rates. That should help reduce costs and make consumers confident to spend. So the economy this year should not be negative," Amara Sriphayak said.
The central bank releases new growth projections on Friday.
Last week Finance Minister Korn Chatikavanij said economic measures -- including tax breaks, especially in the property sector, and cash handouts and transport subsidies for poorer Thais -- should ensure economic growth of 2 percent this year.
That would still be the lowest in a decade and down from an estimated 4 percent in 2008.
In comparison, the Thai economy shrank 10.5 percent in 1998 because of the Asian financial crisis. The weakest performance since then was 2.1 percent growth in 2001. (Writing by Orathai Sriring; Editing by Alan Raybould & Kazunori Takada)