Thailand: Economic growth gains momentum in third quarter but disappoints expectations
November 21, 2011
In the third quarter, GDP expanded 3.5% over the same period last year, which was above the revised 2.7% expansion recorded in the second quarter (previously reported: +2.6% year-on-year). The reading marked the fastest growth rate since the fourth quarter of 2010, but undershot market expectations by almost one full percentage point, which had GDP accelerating to 4.4%. The third quarter print reflected strong growth in the external sector, while domestic demand showed weaker growth compared to the previous quarter. Total consumption decelerated, on the back of slower growth in private consumption (Q2: +2.7% yoy; Q3:+2.4% yoy), while growth in government consumption remained relatively stable (Q2: +1.0% yoy; Q3: +1.1% yoy). Moreover, gross fixed investment decelerated from a 4.1% increase in the second quarter to a 3.3% expansion in the third quarter. On the other hand, the external sector improved compared to the previous quarter, as exports picked up faster than imports. Exports of goods and services grew 17.4%, which was faster than the 12.0% increase observed in the second quarter, while imports expanded 19.3% in Q3, also faster than the 15.1% increase recorded in the second quarter. As a result, the external sector's net contribution to overall economic growth improved from 0.3 percentage points in the second quarter to 1.4 percentage points in the third. At the sector level, the third quarter expansion reflected strong growth in the industrial sector, which bounced back from a 0.4% contraction in the second quarter to a 2.8% expansion. In contrast, growth in services slowed (Q2: +5.4% yoy; Q3: +4.8% yoy), while agriculture deteriorated and contracted 0.9% (Q2: +6.7% yoy). Quarter-on-quarter seasonally adjusted figures confirm the acceleration suggested by the annual reading, as the economy expanded 0.53% in the third quarter, well above the 0.05% increase observed in the previous period. Following the worst flooding in over 50 years, the economy is likely to shrink 3.7% in the final quarter of this year, according to official estimates. Accordingly, the government significantly cut its growth forecast for this year and now expects the economy to grow only 1.5%, well below its previous 4.0% estimate. For 2012, the government projects economic growth to rise to between 4.5% and 5.5%. In the same vein, the Bank of Thailand cut its growth forecast for this year and now expects the economy to expand 2.6%, down from its previous 4.1% estimate. For 2012, the Bank expects the economy to grow 4.1% (previous estimate +4.2%) based on solid fundamentals and on the back of reconstruction efforts.
Author: Ricardo Aceves, Senior Economist