Thai economy accelerates in Q1; June rate rise seen
Southeast Asia's second-largest economy accelerated from 1.3 percent growth in the December quarter and has firmly bounced back from mid-2010 weakness when it contracted for two straight quarters amid weeks of deadly political unrest.
The 2.5 percent growth, adjusted for seasonal factors, was in line with a Reuters survey of 13 economists. From a year earlier, Thailand's economy grew 3.0 percent, slightly ahead of economists' expectations of 2.5 percent.
Other Southeast Asian countries have posted solid first-quarter growth. Indonesia grew 6.5 percent in the first quarter from a year earlier, while Malaysia expanded 4.6 percent.
But as Asia rebounds from the global crisis, price pressures are intensifying, keeping central banks under pressure to tighten policy further and risk some slowdown in growth.
Indonesia, the Philippines, Malaysia, South Korea and India have all raised rates from the record lows, albeit at different paces.
Thailand's central bank, one of Asia's most hawkish, is likely to raise its benchmark one-day repurchase rate again at its next meeting on June 1 after six increases since July last year to tame rising price pressures.
"The considerable growth momentum would give comfort to a hawkish central bank that continues to be very keen to normalise its policy rate further, with a 25 basis point hike on June 1 looking rather certain now," said Wellian Wiranto, an economist at HSBC in Singapore.
The National Economic and Social Development Board, which compiles the GDP data, maintained its projection the economy would grow between 3.5 and 4.5 percent this year in line with the 4.1 percent projected by the central bank and a consensus 4.4 percent expected by economists.
It forecast the Bank of Thailand's policy rate would be 3.5 percent by year-end, up from a current 2.75 percent and above the average 3.25 percent forecast by economists in a Reuters survey after the April central bank meeting.
Exports were likely to expand 17 percent this year, better than the 12.5 percent projected in February, the agency said.
Economists expect some economic weakness in the second quarter from Japan's earthquake and tsunami but said campaign spending ahead of Thailand's July 3 general election should provide a boost.
Beyond that, uncertainty about the post-election political climate clouded the economic outlook, and inflation remained a worry, they said.
"Once the election is over, there will still be concerns surrounding political uncertainties in the second half," said Pimonwan Mahujchariyawong, an economist at Kasikorn Research Center.
"Apart from that, we expect negative factors including rising inflationary pressure and a global economic slowdown, which would continue to affect the export sector."
Thailand's July 3 election is expected to be close and could open a new, tumultuous chapter in a power struggle that has polarised the country for more than five years.
Copyright Reuters, 2011