Thailand: Economic growth cools to near five-year low in Q2
August 19, 2019
Economic growth decelerated to 2.3% in annual terms in the second quarter as U.S.-China trade tensions and a strong baht hindered tourism, agricultural output and exports. The Q2 print, which matched market analysts’ expectations, was down from the 2.8% expansion recorded in the first quarter of 2019 and marked the weakest outturn since Q3 2014. On a quarter-on-quarter seasonally-adjusted basis, economic growth slowed to 0.6% in Q2 from 1.0% in Q1.
The slowdown was broad-based in the second quarter. Private consumption growth eased to 4.4% in Q2 (Q1: +4.9% year-on year), government spending also weakened notably (Q2: +1.1% yoy; Q1: +3.4% yoy); and fixed investment growth slowed to a one-and-a-half-year low (Q2: +2.0% yoy; Q1: +3.2% yoy), on moderating construction and machinery investment.
The external sector had another dismal performance in the second quarter. Exports of goods and services contracted 6.1% over the same month a year prior, matching Q1’s decline. Exports of goods likely fell on declining agricultural production, which have languished amid a drought, while a weakening tourism sector likely dampened exports of services. Meanwhile, the fall in imports of goods and services accelerated in Q2 (Q2: -2.7% yoy; Q1: -0.1% yoy).
Looking ahead, Thailand will continue to face intensifying headwinds from the U.S.-China trade dispute and a slowing Chinese economy. The economic outlook partially hangs in the balance of a combination of fiscal and monetary stimulus measures designed to cushion the slowdown. The GDP report comes on the heels of the Bank’s surprise rate cut earlier in August, while, on 20 August, the government unveiled an economic stimulus package to the tune of THB 370 billion (approximately USD 10bn). The government’s stimulus package intends to provide farmers with financial support, encourage tourism by extending free-visa-on-arrival provisions and giving rebates to domestic tourists, and provide subsidies for low-income earners.
Author: Lindsey Ice, Economist