Thai economy grows faster than estimated on strong exports

Umbrella making at the Bo Sang Craft Village as Thailand’s economic recovery continues. (Bloomberg pic)

BANGKOK: Thailand’s economy grew faster in the second quarter than economists expected, bolstered by exports, consumer spending and investment.

Key points
Gross domestic product rose 4.6% from a year ago, the National Economic & Social Development Board said on Monday, down from a revised 4.9% in the first quarter The median estimate of 19 economists in a Bloomberg survey was 4.4% GDP rose a seasonally adjusted 1% from the previous three months, compared with a median estimate of 0.9% The agency retained its forecast of 4.2% to 4.7% GDP expansion in 2018, while raising the estimate for export growth to 10% from 8.9%.

Thailand’s recovery is continuing on the back of solid trade gains and tourism receipts, though the pace of economic expansion continues to trail behind neighbours in developing Southeast Asia. One key risk is the trade tension between the US and China, which threatens to disrupt regional supply chains but could also prompt some firms to shift production to places like Thailand.

There’s been limited impact on Southeast Asia’s second-largest economy so far from the tilt toward protectionism, the social development board’s Secretary General Thosaporn Sirisumphand said in a briefing in Bangkok.

“Thailand may have more opportunities to send products to the US and China,” he said.

Another challenge stems from a tragedy in July, when more than 40 Chinese tourists died after a tour boat sank off the coast of Phuket. That may temporarily dent the years-long climb in arrivals from China, which stoked the Thai tourism boom.

Thosaporn lowered the 2018 projection for revenue from foreign tourists to 2.15 trillion baht (US$65 billion) from 2.23 trillion baht, partly because of the fallout from the sinking but also because the FIFA World Cup kept some travellers away.

Growth in private consumption accelerated to 4.5% in the second quarter, while investment also picked up, according to the NESDB. Goods exports surged 7.4%, up from 4.7% expansion in the previous three months.

The Bank of Thailand is watching the GDP figures closely to determine how soon it can follow counterparts in Southeast Asia in raising interest rates.

Don Nakornthab, the senior director in charge of the economic and policy department at the Bank of Thailand, said last month that growth of 4.5% or more in the second quarter could boost the odds of a rate increase.

At the same time, subdued inflation and strong currency buffers have enabled policymakers to hold off on tightening this year.

The monetary authority could raise borrowing costs for the first time since 2011 as early as September, Tim Leelahaphan an economist at Standard Chartered Bank in Bangkok, said in a Bloomberg Television interview. Nomura Holdings Inc., meanwhile, reiterated its outlook for the policy rate to remain unchanged at 1.5%.