Thai economy surprises with Q1 growth, but expected to stay weak

Thailand surprisingly reported quarterly growth for the first three months of 2015 but the economy is still stumbling one year after the army took power.

The National Economic and Social Development Board (NESDB) said on Monday the economy expanded a seasonally-adjusted 0.3 percent in the first quarter from October-December, contrary to expectations in a Reuters poll for shrinkage of 0.5 percent.

On an annual basis, the agency reported growth of 3.0 percent, below the poll forecast of 3.4 percent. The Thai economy had a very weak first quarter in 2014, as political tensions rose, so there was a low base for Monday’s figures.

Along with first quarter numbers, the NESDB unveiled revisions to past ones, based on a technical rebasing of GDP data. October-December growth was revised to 1.1 percent from the prior quarter, rather than 1.7 percent.

The agency said the new series, long in preparation, had a little impact on first quarter GDP results. Some economists were skeptical.

Santitarn Sathirathai of Credit Suisse in Singapore said the reason Thailand avoided an on-quarter contraction “was largely because of that downward revision in Q4, which of course made the base easier”.

He said that January-March’s quarterly growth “hasn’t changed the message that the momentum is quite weak in the first half of the year.”

The NESDB said a “decent overall economic recovery” is under way, though problems include falling prices for farmers will hurt growth.

After the coup in May 2014, Thailand’s big tourism sector has improved, but the main growth engines of consumption and exports have not been firing well at all.

‘PERFECT STORM’ FOR EXPORTS

Exports, equal to more than 60 percent of GDP, fell 4.3 percent on the year in the first quarter and are likely to contract for the third straight year in 2015.

Bank of Thailand Governor Prasarn Trairatvorakul told Reuters on Friday a “perfect storm” hit exports in the first quarter. He said having 3 percent growth this year was “going to be a challenge”.

The planning agency on Monday reduced its 2015 forecast to 3.0-4.0 percent, from the 3.5-4.5 percent it saw in February.

Thailand’s monetary policy committee has cut the benchmark interest rates THCBIR=ECI at its last two meetings.

But economists say what’s needed is much faster spending by the government.

“Monetary easing can only mitigate the delay in fiscal stimulus, but is no panacea,” ANZ said after Monday’s GDP release. “Fiscal policy clearly needs to lead to jumpstart the economy, given that the marginal boost from trimming the interest rate from already low levels is minimal.”

Source: Reuters