Thai Q2 GDP growth seen weakest in 4-1/2 years as exports tumble

Usama Fayyaz August 15, 2019

BANGKOK: Thailand’s economic growth likely slowed in April-June from the prior three months, with the annual pace the weakest for any quarter in four and a half years, amid cooling global demand and trade tensions, a Reuters poll showed.

Exports, a key driver of Thai growth, continued to contract while gains from tourism and domestic activity slowed, and public spending was crimped by the delayed formation of a government after March’s elections.

In the poll, the median forecast from 12 economists was 2.4pcannual growth, which would be the lowest since the 2014’s last quarter, which was the same. The pace in January-March was 2.8pc.

For seasonally-adjusted quarterly growth, the median forecast was 0.7pc in the second quarter, compared with the first quarter’s 1.0pc.

“Weaker external demand started to filter down to domestic demand,” said Sarun Sunansathaporn, economist of Bank of Ayudhya, who predicts second quarter annual growth of 2.1pc.

Charnoon Boonnuch, a Nomura economist in Singapore, said the economy “remains vulnerable to any escalation of US-China trade tensions and a risk from an intensifying drought”.

The poll’s forecast for full-year 2019 growth was 3.0pc, slowing from last year’s 4.1pc, the best rate in six years.

Southeast Asia’s second-largest economy is heavily reliant on tourism, and arrivals increased only 1.1pc in the second quarter. Visitors from China, the biggest source, declined.

In the second quarter, exports declined 4.2pc from a year earlier. Putting pressure on exports, in addition to the trade war, is the strong baht. Due to inflows, it has strengthened 5.5pc against the dollar this year, making it Asia’s top performer.

In a bid to boost flagging growth, the government will introduce a big stimulus package later this month, Finance Minister Uttama Savanayana has said.

Last week, the central bank also unexpectedly cut its key interest rate for the first time since April 2015, saying growth could miss its forecast this year. Most economists expect more policy easing later this year.

The National Economic and Social Development Council, which compiles GDP data, has forecast economic growth of 3.3pc-3.8pc this year, with exports up 2.2pc. It is expected to downgrade those forecasts again on Monday.

Second-quarter private investment fell 2.8pc from a year earlier while consumption growth slowed to 3.3pc, central bank indices showed.

Copyright Reuters, 2019

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