Thailand: Economic activity expands less than expected
November 20, 2010
In the third quarter, gross domestic product (GDP) expanded 6.7% over the same period last year. The reading was well below the revised 9.2% expansion observed in the second quarter (previously reported: +9.1% year-on-year) and undershot market expectations, which had the economy growing 7.2%. The slowdown in the third quarter was the result of a deterioration of the external sector. Exports decelerated sharply compared to with previous quarter, while imports slowed less notably. Exports of goods and services grew 11.7% in the third quarter, which was down from the 22.3% expansion registered in the second quarter. Imports expanded 21.2% annually, which was only moderately down from the 24.6% increase observed in the second quarter. As a result, the net contribution from the external sector to overall growth swung from a 2.3 percentage-point contribution in the second quarter to a 2.6 percentage-point detraction in the third quarter. On the domestic side, total consumption decelerated in the third quarter, as private consumption grew 5.0% year-on-year (Q2: +6.4% yoy), and government consumption increased only 2.0% (Q2: +8.4 yoy). Gross fixed capital formation marked the slowest expansion so far this year, growing 8.0% annually (Q2: +11.3% yoy). At the sector level, the third quarter reading reflected a contraction in agriculture (Q2:+1.5% yoy; Q3:-3.3% yoy), as a result of the natural disasters that hit the country in recent months. In addition, the industrial sector decelerated (Q2: + 16.5% yoy; Q3: +10.8 yoy). Only the services sector improved, driven by a faster expansion in hotels and restaurants. A quarter-on-quarter analysis confirms the deceleration suggested by annual figures, as the economy contracted a seasonally adjusted 0.23% over the previous quarter. Meanwhile, the government expects the economy to expand 7.9% this year, before slowing to a range of 3.5% and 4.5% in 2011. The Central Bank lifted its 2010 growth forecast in its October inflation report from 6.5% - 7.5% expected previously to the current 7.3% - 8.0%.
Author: Ricardo Aceves, Senior Economist