Thai Growth May Slow Even Further


In the first quarter of 2013, Thai economy slowed more than expected. While household consumption and private investment remained resilient, public spending and exports were disappointing. Yet, the recent decline in consumer confidence, together with the fall in public salaries, shows that household consumption is likely to decline in the next quarter. Indeed, unless the external sector gains momentum and government spending programme move forward, the economy would slow even further in the next three months.


In Q1 of 2013, the GDP growth slowed to 5.3 percent yoy, from 19.1 percent in the previous quarter. Domestic demand remained the main driver of the expansion while exports have been hurt by a strong baht. On a quarter-over-quarter basis, the GDP shrank by 2.2 percent.
 


Since the beginning of the year, exports have been weak, hurt by lower external demand and by a strong baht. In March, shipments rose 4.5 percent yoy, well below the target of 7.5-9 percent needed to achieve a 5 percent GDP growth rate. In the same period, manufacturing output increased a meager 0.5 percent yoy.

     

In April, consumer confidence declined for the first time in seven months and in Q1 of 2013, private expenditure rose only 4.2 percent yoy. This is a clear sign that the growth fuelled by consumption may slow down in the months ahead.
 
In the last 5 months, the inflation rate has been on a downward trend. Cooling of the economy in connection with slower prices growth is giving more room for the Central Bank to cut the interest rate.
   
 

 


Joana Taborda | joana.taborda@tradingeconomics.com
5/20/2013 3:40:13 PM