Gross domestic product increased 4.2 per cent in the three months through June from a year earlier, after expanding a revised 0.4 per cent in the previous quarter, the National Economic and Social Development Board said in Bangkok on Monday. That exceeded all 16 forecasts in a Bloomberg News survey that had a median prediction of a 3.1 per cent rise.
Prime Minister Yingluck Shinawatra, who marked her first year in office this month, has shelved politically contentious legislation to focus on the economy as Thailand recovers from the worst floods in almost 70 years in 2011. Southeast Asian nations from Indonesia to Malaysia have also cut interest rates or increased public spending to boost consumption as Europe’s debt crisis and a faltering US recovery curb exports.
“Economic uncertainty, especially from the euro region, remains a key risk in the second half,” Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board, said at a media briefing. “We need to accelerate budget spending to boost the local economy.”
The government agency cut its estimate for expansion this year to a range of 5.5 per cent to 6 per cent, from an earlier outlook for 5.5 per cent to 6.5 per cent growth, and reduced its forecast for export growth to 7.3 per cent from 15.1 per cent on concern the European debt crisis will damp demand, Arkhom said.
Outlook ‘bleak’
“Domestic consumption and investment are pillars of the Thai economy amid a very bleak external demand outlook,” Supavud Saicheua, managing director at Phatra Securities in Bangkok, said before the data release. “My biggest concern will be next year. The end of some stimulus policies may slow down domestic consumption, while the economic crisis in Europe will continue to hurt exports.”
The baht was little changed at 31.52 per dollar as of 10.36am in Bangkok on Monday, according to data compiled by Bloomberg. Thailand’s benchmark SET Index of stocks fell 0.3 per cent.
The Bank of Thailand kept its policy rate at three per cent for a fourth meeting last month, and cut its expansion forecast for the year to 5.7 per cent from 6 per cent. It reduced its export growth estimate to 7 per cent from 8.3 per cent and said inflation will be 2.9 per cent from an earlier prediction of 3.3 per cent.
Adjust policy
There is room to adjust monetary policy to support economic growth if needed, and the central bank is ready to do more, it said at the time. Finance Minister Kittiratt Na-Ranong said earlier this month he’d like to see the baht weaken slightly to help exporters and the benchmark rate should be 2.5 percent as inflation is now manageable.
“The stronger data is unlikely to alter the call for easing by the BOT, although the timing might be delayed,” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale SA in Hong Kong. “Export data has already shown weakness.”
Exports fell 4.2 per cent in June from a year earlier, the fourth decline in six months, even as the local unit of Toyota Motor had record local sales this year after supply constraints eased and the Thai government offered as much as 100,000 baht (Dh11,649) in tax savings for first-time buyers.
Meeting the government’s full-year export growth target of 15 per cent will be “difficult,” after shipments contracted by 2.1 per cent in the first half, Arkhom said.
“To reach the target, we need to ship $25 billion per month, which is a very high level,” he said.
Higher wages
Yingluck’s government has raised minimum wages and pledged to spend more than 2 trillion baht on infrastructure and water- management projects over the next seven years to boost growth and prevent a repeat of the flood disaster, which killed more than 700 people and cost the economy 1.4 trillion baht.
Thailand’s economy, the biggest in Southeast Asia after Indonesia, grew 3.3 per cent last quarter from three months earlier, compared with a revised 10.8 per cent increase in the previous period. The median forecast in a Bloomberg News survey was for a two per cent gain quarter on quarter.-GulfNews.com (August 20, 2012 14:57)
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