Thailand: Economic growth slows in fourth quarter
February 21, 2011
In the fourth quarter, GDP expanded 3.8% over the same period the year before. The reading was a deceleration compared to the revised 6.6% expansion observed in the third quarter (previously reported: 6.7% year-on-year) but overshot private sector analysts' expectations, which had the economy growing a more moderate 3.5%. The deceleration reflects, in part, the waning of a favourable base effect, which had boosted growth in the previous quarters. On a full-year basis, the economy expanded 7.8% in 2010, which contrasted the 2.3% contraction recorded in 2009. The result represented the strongest annual expansion in 15 years. The slowdown in the fourth quarter was the result of weaker domestic demand. Total consumption decelerated, as private consumption grew a more moderate 3.8% (Q3: +5.0% year-on-year) and government consumption expanded only 1.8% (Q3: +3.7% yoy). In addition, gross fixed capital formation decelerated from a 7.9% increase in the third quarter to a 6.4% expansion in the fourth. However, the external sector improved compared to the previous quarter, as exports decelerated less than imports. Exports of goods and services slowed from an 11.7% expansion in the third quarter to a 9.5% increase in the fourth, whereas imports moderated from a 21.3% increase in the third quarter to a 10.4% expansion in the final quarter of 2010. As a result, the net contribution from the external sector to overall economic growth improved from a 2.6 percentage-point detraction in the third quarter to a 1.1 percentage-point contribution in the fourth quarter. At the sector level, the fourth quarter reading reflected a contraction in agriculture (Q3: -4.5% yoy; Q4: -3.3% yoy). In addition, the industrial sector slowed sharply (Q3: +10.8% yoy; Q4: +4.8%) on the back of a deceleration in manufacturing. Only the services sector improved, driven by a faster expansion in financial intermediation services. A quarter-on-quarter analysis does not corroborate the slowdown suggested by the annual figures, as the economy expanded 1.18% in seasonally adjusted terms, which contrasted the 0.33% contraction observed in the previous quarter. The Central Bank expects the economy to expand between 3.0% and 5.0% this year, while the National Economic and Social Development Board expects the economy to expand between 3.5% and 4.5% this year.
Author: Ricardo Aceves, Senior Economist