Thai GDP tops forecast
BANGKOK, Aug 20 — Thailand’s economy grew a stronger-than-expected 3.3 per cent in the second quarter from the previous three months as it continued to recover from last year’s devastating floods, helping it withstand the global slowdown for now. Given the recovery, economists said there was no pressing need for the central bank to cut interest rates. Most expect it to leave policy on hold all year after cuts in November and January to help industry deal with the disaster.
The second-quarter growth figure reported today by the National Economic and Social Development Board (NESDB) was higher than the 1.7 per cent expected in a Reuters poll, and came after a revised record 10.8 per cent expansion in the first quarter of 2012, when economic activity started to rebound from the floods.
“Domestic demand remained strong and is providing enough cushion against global economic risks, at least for the near future,” said Usara Wilaipich, an economist at Standard Chartered in Bangkok.
Elsewhere in Southeast Asia, growth in Indonesia and Malaysia also was surprisingly buoyant in the second quarter, with strong domestic demand and government spending offsetting weaker exports.
In Thailand, the region’s second-biggest economy, exports were better than expected in the second quarter due to the industrial rebound, while the economy was also helped by a high number of tourists, according to the NESDB planning agency, which compiles the data.
The government has introduced measures to help business cope with the floods as well as other expansionary policies promised during last year’s election, such as big wage increases and a rice intervention scheme, which will boost income and spending.
The central bank, which cut its policy rate in November and January to help business deal with the floods, has said economic growth is close to potential as domestic demand has picked up, but risks to the international economy have grown.
Thai exports unexpected fell in June on slower demand from Europe and a sharp drop in rice shipments.
DOUBTS OVER EXPORTS
The central bank has left the rate at 3.0 per cent at the last four meetings and most economists do not expect any change for the rest of the year unless the global economy deteriorates further.
The floods ravaged huge industrial zones last October, hitting car and electronics firms. Thailand is Southeast Asia’s biggest car producer and the world’s number two maker of hard disk drives.
The Industry Ministry has said car firms are now fully operational but some electronics firms may still not be back to normal until the fourth quarter.
Manufacturing rose 2.7 per cent in the second quarter from a year earlier while private investment rose 11.8 per cent and household spending increased 5.3 per cent. But exports eased 0.4 per cent.
From a year before, the economy grew 4.2 per cent in the second quarter, beating the forecast of 2.9 per cent in the Reuters poll. The agency revised up annual growth in the first quarter slightly to 0.4 per cent from 0.3 per cent.
“GDP for Q2 increased because factories were able to increase their manufacturing capacity, although that is not back to potential yet,” Arkhom Termpittayapaisith, secretary-general of the NESDB, told a news conference.
The NESDB trimmed its 2012 GDP growth forecast to 5.5-6.0 per cent from the 5.5-6.5 per cent predicted in May to reflect weaker global demand.
It now expects exports to grow just 7.3 per cent this year, rather than the 15.1 per cent seen in May.
Last month, the central bank said exports would grow just 7 per cent this year, rather than 8 per cent.
It also cut its growth forecast to 5.7 per cent from 6 per cent. Economists in a Reuters poll predicted 5 per cent, after 0.1 per cent growth in 2011 due to the floods.
The NESDB cut its 2012 headline inflation forecast to 2.9-3.4 per cent from the 3.5-4.0 per cent seen in May. The central bank has predicted 2.9 per cent. — Reuters