Thailand: Economic growth moderates in first quarter
May 23, 2011
In the first quarter, GDP expanded 3.0% over the same period last year, which represented a slowdown compared to the 3.8% increase registered in the fourth quarter. The reading undershot the Finance Ministry's estimate of a 4.0% rise but beat market expectations, which had the economy growing 2.5%. The deceleration reflected, in part, the waning of a favourable base effect, as GDP expanded 12.0% in the first quarter of 2010. The deceleration in the first quarter was the result of weaker growth in domestic demand, as total consumption decelerated, on the back of slower growth in private consumption (Q4: +3.9% year-on-year; Q1: +3.4 yoy) and government consumption (Q4: +3.2% yoy; Q1: +0.6% yoy). In contrast, gross fixed capital investment accelerated from a 6.4% expansion in the fourth quarter to a 9.3% increase in the first quarter. However, the external sector improved compared to the previous quarter, as exports accelerated more than imports. Exports of goods and services grew 15.9%, faster than the 9.5% increase registered the previous quarter and imports accelerated from a 10.5% expansion in the fourth quarter to a 16.2% increase in the first. As result, the net contribution from the external sector to overall economic growth improved from 1.0 percentage points in the fourth quarter to 2.7 percentage points in the first quarter. At the sector level, the first quarter result reflected slower growth in industry (Q4: +4.8% yoy; Q1: +1.6% yoy) and in services (Q4: +4.6% yoy; Q1: +3.8% yoy). In contrast, agriculture bounced back from a 3.5% contraction in the final quarter of 2010 to a 6.7% increase in the first quarter. A quarter-on-quarter comparison, however, does not corroborate the slowdown suggested by the annual figures, as the economy expanded 2.04% in seasonally adjusted terms, which was above the 1.29% increase observed in the previous quarter. Meanwhile, the Finance Ministry maintained its growth projection of 4.0% to 5.0% for this year. The Central Bank anticipates that economic activity will grow 4.1% this year. For 2012, the Bank expects the economy to expand 4.2%.
Author: Ricardo Aceves, Senior Economist