BANGKOK: Thailand's economy grew by 0.5 percent in the third quarter from the second, much less than expected, and since it is bound to shrink in the fourth quarter because of flooding, economists said the central bank would cut interest rates this month.
The economy is expected to shrink 3.7 percent in the fourth quarter from a year before, the state planning agency said on Monday, and that could prompt the central bank to cut rates by 25 or even 50 basis points next Wednesday, economists said.
Until recently, most economists had expected the monetary policy committee (MPC) to leave rates on hold, as in October.
"This, combined with a sharp fall in consumer confidence to the lowest levels in 10 years in October, leads us to expect a one-off policy rate cut of 50 basis points to 3.0 percent at the next MPC meeting on Nov. 30 to restore consumer and business sentiment," Usara Wilaipich of Standard Chartered Bank said after the data.
The quarterly growth in Southeast Asia's second-largest economy compared with the 1.5 percent expected in a Reuters poll.
From a year earlier, the economy grew 3.5 percent, below economists' forecast of 4.5 percent.
Flooding has crippled Thailand's economy, affecting agriculture, tourism and industry, the car sector and electronics in particular. The problem got worse from October.
In contrast Malaysia's growth accelerated to 5.8 percent in the third quarter from a year earlier, while Singapore posted better-than-expected annualised 1.3 percent growth. Indonesia grew a strong 6.5 percent from a year earlier.
The baht was at 31.03 per dollar at 0450 GMT, unaffected by the data, while the stock market was down 0.5 percent, faring better than some Southeast Asian markets.
GDP FORECAST LOWERED
The National Economic and Social Development Board (NESDB), which compiles the GDP data, now expects the Thai economy to grow only 1.5 percent this year rather than 3.5-4.0 percent because of the flooding.
Last month the central bank cut its forecast to just 2.6 percent for this year from 4.1 percent. It may review that forecast next week.
Although water has subsided in many areas and some businesses are back to work, it could take weeks for some plants to resume operations.
Economic growth is expected to accelerate to 4.5-5.5 percent next year , the planning agency said, because of pent-up demand and post-flood spending on repairs and reconstruction.
"The NESDB expects a possible 'V-shaped' recovery next year ... This compares with our forecast of 4.7 percent and the Bank of Thailand's 4.2 percent," said Nuchjarin Panarode, an economist at Capital Nomura Securities.
The government has promised 130 billion baht ($4.2 billion) to help the recovery effort, but rebuilding and the improvement of flood defences will require huge sums. Ministers have talked about 600-700 billion baht for short- and long-term reconstruction.
The NESDB raised its export growth forecast slightly to 17.2 percent for this year from 16.5 percent and projected growth of 19 percent next year.
It forecast headline inflation would be 3.8 percent this year and 3.5-4.0 percent in 2012.
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