Thailand: Economic growth slows in second quarter
August 22, 2011
In the second quarter, GDP expanded 2.6% over the same period last year, which was below the revised 3.2% increase observed in the first three-month up to March. The reading represented the slowest growth rate since the economy exited recession in the final quarter of 2009 and fell short of market expectations that had GDP accelerating to 3.6%. Quarter-on-quarter seasonally adjusted figures point to an even sharper deterioration than the slowdown suggested by the annual reading, as the economy contracted 0.19% in the second quarter, contrasting the 1.97% increase observed in the previous period. In part, the disappointing second quarter print reflected a larger-than-expected impact from the Japan's earthquake in March. The second quarter outturn showed weaker growth in domestic demand, as total consumption decelerated, on the back of slower growth in private consumption (Q1: +3.3% year-on-year; Q2: +2.8% yoy) and government consumption (Q1: +1.8% yoy; Q2: +1.0% yoy). In addition, gross fixed capital investment decelerated sharply from a 9.3% expansion in the first quarter to a 4.1% increase in the second quarter. The external sector deteriorated markedly compared to the previous quarter, as exports decelerated more than imports. Exports of goods and services grew 11.8%, slower than the 16.0% increase registered in the previous quarter, while imports slowed from a 16.8% expansion in the first quarter to a 14.9% increase in the second. As a result, the net contribution from the external sector to overall economic growth deteriorated from 2.5 percentage points in the first quarter to only 0.3 percentage points in the second quarter. At the sector level, the second quarter deceleration reflected slower growth in agriculture (Q1: +7.6% yoy; Q2: +6.7% yoy), while the industrial sector contracted 0.6% compared to the previous quarter (Q1: +1.6% yoy). In contrast, services accelerated from a 3.9% increase in the first quarter to a 5.2% expansion in the second quarter. The Bank of Thailand anticipates economic activity to grow 4.1% this year and to reach 4.2% in 2012.
Author: Ricardo Aceves, Senior Economist