Thailand: Economy accelerates in Q1 amid strong external sector
May 16, 2016
The Thai economy gained strength in the first quarter of this year and GDP expanded at the fastest rate since Q1 2013. Q1’s robust growth provides some relief to the military government, which has been trying to kick-start the economy since it took power two years ago. However, despite the acceleration, there are concerns over whether the factors that drove growth in Q1 will be sustained in the short term. GDP in Q1 expanded 3.2% over the same quarter of the previous year, which was up from the 2.8% increase observed in the fourth quarter of last year. The result broadly reflected a significant acceleration in government spending due to the government’s aggressive stimulus measures as well as an increase in exports.
In the first quarter, the external sector improved considerably compared to the previous quarter. Net exports contributed 6.9 percentage points to overall economic growth, thus improving from the 1.8-percentage-point contraction observed in the fourth quarter. The result reflects a recovery in exports (Q4: -3.3% year-on-year; Q1: +5.1% yoy) due to a pick-up in gold and military equipment exports. On the other hand, imports contracted 4.8% in the first quarter, which was a deterioration over the 1.2% decrease seen in the previous quarter.
On the domestic side of the economy, government spending accelerated from a 4.8% increase in Q4 to an 8.0% rise in Q1 amid an aggressive fiscal stimulus. The figure marked the fastest expansion in nearly four years. However, high household debt and adverse weather conditions weighed on private consumption, which decelerated to a 2.4% growth in the first quarter (Q4: +2.6% yoy). Moreover, fixed investment also disappointed in Q1 and grew only 4.7%, which was half of the previous quarter’s 9.4% increase.
Sequential data corroborated the improvement suggested by the annual data as GDP expanded 0.9% in seasonally-adjusted terms in Q1, which was down from the 0.8% increase tallied in the fourth quarter.
Author: Dirina Mançellari, Senior Economist