Thai third-quarter GDP up 1.2 percent quarter-on-quarter, tops forecast despite export slump

BANGKOK Mon Nov 19, 2012 11:05am IST

An office building under construction is seen in Bangkok’s business district July 28, 2011. REUTERS/Sukree Sukplang

An office building under construction is seen in Bangkok’s business district July 28, 2011.

Credit: Reuters/Sukree Sukplang

BANGKOK (Reuters) - Thailand's economy grew a stronger-than-expected 1.2 percent in the third quarter from the previous three months, reinforcing expectations that the central bank will keep its policy interest rate on hold until 2013.

Third-quarter growth was slower than April-June's revised 2.8 percent, as the weakening global economy hit exports and factory production. But the latest pace was higher than the 0.9 percent quarterly gain forecast in a Reuters poll.

The Bank of Thailand's policy committee, which surprisingly cut rates in October, holds its last meeting of the year on November 28.

"We believe that policy rate will remain on an easing bias, although we do not expect the BOT to cut rate by another 25 basis points until the first half of 2013," said Usara Wilaipich, senior economist at Standard Chartered Bank in Bangkok.

The National Economic and Social Development Board (NESDB) on Monday also said that gross domestic product in the third quarter expanded 3.0 percent from a year earlier, almost matching the 3.1 percent forecast by the polled economists, and compared with revised annual growth of 4.4 percent in the second quarter.

"Domestic factors were a boost for this quarter as consumption expanded well, particularly household expenditure as well as total investment," Arkhom Termpittayapaisith, NESDB secretary-general, told a news conference.

WEAK EXPORTS

Overall investment rose 15.5 percent in the third quarter from a year before while overall consumption was up 6.5 percent, with household spending up 6 percent year-on-year.

Activity in the first half of the year was buoyed to a large extent by spending on reconstruction and replacement equipment after devastating floods in late 2011, but much of that rebuilding has now been completed.

Exports fell 3 percent in the third quarter from a year earlier as global demand for Asian goods deteriorated, the agency said.

Manufacturing slumped 10.2 percent from a year before, even as factories restored more capacity after the floods. Industrial goods account for about 65 percent of exports.

Like in many Southeast Asian nations, strong domestic demand and tourism have helped shore up Thailand's economy even as exports and industrial output slumped.

After a strong start to the year, growth across Southeast Asia has cooled in response to prolonged weakness in demand in Europe and the United States, and a slowdown in China. Still, regional economies have remained relatively more resilient than most developed countries and continue to attract solid foreign investment.

Annual growth in Indonesia in the third quarter, year-on-year, as exports slowed, but it was still 6.2 percent. In April-June, growth was 6.4 percent.

For Thailand, the NESDB revised its forecast for 2012 economic growth to 5.5 percent, compared with its previous 5.5-6.0 percent range. Due to the floods, growth in 2011 was only 0.1 percent.

MORE EASING AHEAD?

In a bid to spur flagging growth, Thailand's central bank's monetary policy committee (MPC) cut the benchmark interest rate by a quarter of a point to 2.75 percent on October 17. At the same time, the central bank cut its GDP growth forecast for next year to 4.6 percent from 5 percent.

While most economists expect no change in the policy rate next week, some still think a cut is possible.

"We believe that moderating growth momentum and expectations of manageable inflation will keep the bias of the majority of MPC members to support business sentiment," said economist Rahul Bajoria of Barclays Capital. "We continue to expect the BOT to cut rates by another 25 bps in the next policy meeting, despite a likely acceleration in inflation in 2013."

The central bank appeared to have played down inflation risks, forecasting headline inflation of 3.0 percent for 2012 and down to 2.8 percent for 2013.

The NESDB forecast 2012 headline inflation of 3.0 percent for 2012 and 2.5-3.5 percent for next year.

The Thai agency forecast GDP growth of 4.5-5.5 percent for 2013. Economists polled by Reuters have predicted growth of 5.3 percent in 2012 and 4.5 percent for 2013.

The NESDB cut its export growth forecast to 5.5 percent from 7.3 percent for this year, but forecast export growth of 12.2 percent for 2013.

(Additional reporting by Sinsiri Tiwutanond and Amy Lefevre; Editing by Richard Borsuk)

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