Thailand: Economy records quickest expansion since Q4 2012 in Q2
August 16, 2021
GDP rebounded in the second quarter, rising 7.5% year-on-year and contrasting the 2.6% contraction logged in the first quarter. Q2's reading, which came in above market analysts’ expectations, marked the first growth in GDP since Q4 2019 and the best result since Q4 2012. On a seasonally-adjusted quarter-on-quarter basis, economic growth picked up marginally to 0.4% in Q2 from 0.2% in the previous period.
Q2’s upturn in annual terms reflected improvements in consumer and capital spending during the period. Private consumption growth hit an over one-year high of 4.6% in the second quarter (Q1: -0.3% yoy), while fixed investment growth reached an over five-year high of 8.1%, up from the first quarter's 7.3% expansion. However, government consumption grew at a slower pace of 1.1% in Q2, moderating from Q1’s 2.1% reading.
On the external front, exports of goods and services rebounded sharply, growing 27.5% in Q2 (Q1: -10.5% yoy). In addition, growth in imports of goods and services picked up notably to 31.4% in Q2 (Q1: +1.7% yoy), marking the best reading since Q1 2010. As such, the external sector detracted 2.1 percentage points from overall growth in Q2, improving from the 8.0 percentage-point subtraction in Q1.
In its release, the Office of National Economic and Social Development Board downgraded its outlook for 2021, projecting the economy to expand between 0.7% and 1.2%—down from 1.5%–2.5% in its May forecasts—as the impact of the surge in Covid-19 infections since the start of July darkens prospects considerably. However, continued public spending should help weather the headwinds, while the ongoing improvement in external demand as vaccination campaigns gather pace in key international markets should bolster exports through the remainder of the year.
Regarding the outlook, Barnabas Gan, economist at United Overseas Bank, commented:
“In a nutshell, Thailand’s economic prognosis has clearly worsened since the start of 2021. Renewed Covid-19 risks remain the key drag to economic performance, considering the negative impact it could have on Thailand’s tourism, labour and domestic consumption. Notwithstanding the strong rebound in GFCF in Q1 2021, further exacerbation of Covid-19 risks in Thailand may also affect investor confidence in the year ahead. […] As such, we downgrade our full-year growth to 0.7% in 2021, thus translating into a GDP contraction of 0.6% in H2 2021.”
Author: Stephen Vogado, Economist