Thailand: Economy decelerates slightly in Q4 amid weak external sector
February 14, 2016
The Thai economy decelerated slightly in the final quarter of last year, although growth remained healthy. GDP expanded 2.8% annually in Q4, which was down from the 2.9% increase seen in the third quarter and matched market expectations. In 2015 as a whole, the economy accelerated markedly over 2014’s 0.8% growth—the slowest in three years—and grew 2.8%. The result broadly reflected an increase in government spending, which more than offset faltering exports. Last year, the economy benefited from an accommodative monetary policy and a calmer political scenario following the military coup in 2014.
Q4’s expansion came on the back of strong domestic demand, while the external sector continued to drag on growth. Government expenditure recorded the largest expansion in three years, rising 4.8% in Q4, which was up from the 2.3% increase tallied in the previous quarter. The expansion was underpinned by the military government’s stimulus measures. Last year, budget spending accelerated in an effort to help both businesses and farmers and to boost private consumption. In fact, in Q4, growth in private spending accelerated from 1.8% in Q3 to 2.5%, thus marking the fastest increase in three quarters. Moreover, fixed investment rebounded in the final quarter of 2015 and grew 9.4% (Q3: -2.6% year-on-year).
On the external side of the economy, weak global demand weighed on exports, which recorded a 3.5% annual decrease in Q4. The figure contrasted the 1.7% expansion observed in the third quarter. On the other hand, the contraction in imports softened from a 2.6% decrease in Q3 to a 1.3% drop in Q4. Overall, the external sector shaved off 1.9 percentage points from overall economic growth, which contrasted the 3.3-percentage-points contribution to growth recorded in the previous quarter.
Sequential data corroborated the moderation suggested by the annual data as GDP expanded 0.8% in seasonally-adjusted terms in Q4, which was down from the 1.0% increase tallied in the third quarter.
Author: Dirina Mançellari, Senior Economist