Thai economy heading towards recession

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Thai sleepingThailand’s economy shrank more than expected in the first quarter of 2014 as exports remained weak and domestic activity was battered by months of political unrest, which could put the country into recession. The state planning agency said on May 19 that there was a 2.1 per cent contraction from January to March, compared with the previous three months, while the first quarter shrank 0.6 per cent from a year earlier.

The National Economic and Social Development Board (NESDB), which compiles GDP data, also chopped its 2014 growth forecast to a range of 1.5 to 2.5 per cent from previously 3 to 4 per cent. The on-quarter contraction was the first in a year and the on-year performance was the weakest since the end of 2011, when the economy shrank 8.9 per cent due to devastating floods.

Economists had forecast GDP in January-March to shrink by 1.6 per cent from the previous quarter on a seasonally adjusted basis and the economy to have growth of 0.1 per cent on an annual basis.

The planning agency revised its figure for 2013 fourth-quarter growth from the previous three months to 0.1 from 0.6 per cent. It left year-on-year growth for October-December at 0.6 per cent.

Thailand, the second biggest economy in Southeast Asia, is the only regional one to be contracting. Malaysia reported annual growth of 6.1 per cent in the first quarter while Indonesia, the largest economy, this month announced its slowest growth in years, but January-March’s annual pace was still 5.21 per cent.

Since December, Thailand has been run by a caretaker administration with limited fiscal powers and there is no end in sight to the political crisis as protest groups seek to install an unelected government. The economic outlook for the current quarter and beyond is grim.

Given the lack of a functioning government and the worsening economy, there may be increased pressure on the central bank to cut its benchmark rate at its June 18 policy meeting after leaving it unchanged at 2 per cent in April.

Consumer confidence is at a 12-year low, tourists are staying away from Bangkok and public spending has been delayed. Many parts of the economy are feeling the pinch, even the property sector, which proved resilient during previous bouts of unrest.

The political turmoil is also hurting Thailand’s big auto sector, which accounts for 11 per cent of GDP and is the largest in Southeast Asia. Domestic car sales are falling and some 30,000 industry jobs have been lost his year.

Thai Airways last week reported a quarterly loss and expects more red ink in the second and third quarters as “we have been severely affected by the politics”, chairman Prajin Juntong said.

Tourism accounts for about 10 per cent of GDP and visitors dropped about 5 per cent in January-April from a year earlier. This month, the Tourism Authority of Thailand cut its forecast for 2014 tourist arrivals to 26.3 million, the lowest in five years, from 28 million.

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Reading Time: 2 minutes

Thailand’s economy shrank more than expected in the first quarter of 2014 as exports remained weak and domestic activity was battered by months of political unrest, which could put the country into recession. The state planning agency said on May 19 that there was a 2.1 per cent contraction from January to March, compared with the previous three months, while the first quarter shrank 0.6 per cent from a year earlier.

Reading Time: 2 minutes

Thai sleepingThailand’s economy shrank more than expected in the first quarter of 2014 as exports remained weak and domestic activity was battered by months of political unrest, which could put the country into recession. The state planning agency said on May 19 that there was a 2.1 per cent contraction from January to March, compared with the previous three months, while the first quarter shrank 0.6 per cent from a year earlier.

The National Economic and Social Development Board (NESDB), which compiles GDP data, also chopped its 2014 growth forecast to a range of 1.5 to 2.5 per cent from previously 3 to 4 per cent. The on-quarter contraction was the first in a year and the on-year performance was the weakest since the end of 2011, when the economy shrank 8.9 per cent due to devastating floods.

Economists had forecast GDP in January-March to shrink by 1.6 per cent from the previous quarter on a seasonally adjusted basis and the economy to have growth of 0.1 per cent on an annual basis.

The planning agency revised its figure for 2013 fourth-quarter growth from the previous three months to 0.1 from 0.6 per cent. It left year-on-year growth for October-December at 0.6 per cent.

Thailand, the second biggest economy in Southeast Asia, is the only regional one to be contracting. Malaysia reported annual growth of 6.1 per cent in the first quarter while Indonesia, the largest economy, this month announced its slowest growth in years, but January-March’s annual pace was still 5.21 per cent.

Since December, Thailand has been run by a caretaker administration with limited fiscal powers and there is no end in sight to the political crisis as protest groups seek to install an unelected government. The economic outlook for the current quarter and beyond is grim.

Given the lack of a functioning government and the worsening economy, there may be increased pressure on the central bank to cut its benchmark rate at its June 18 policy meeting after leaving it unchanged at 2 per cent in April.

Consumer confidence is at a 12-year low, tourists are staying away from Bangkok and public spending has been delayed. Many parts of the economy are feeling the pinch, even the property sector, which proved resilient during previous bouts of unrest.

The political turmoil is also hurting Thailand’s big auto sector, which accounts for 11 per cent of GDP and is the largest in Southeast Asia. Domestic car sales are falling and some 30,000 industry jobs have been lost his year.

Thai Airways last week reported a quarterly loss and expects more red ink in the second and third quarters as “we have been severely affected by the politics”, chairman Prajin Juntong said.

Tourism accounts for about 10 per cent of GDP and visitors dropped about 5 per cent in January-April from a year earlier. This month, the Tourism Authority of Thailand cut its forecast for 2014 tourist arrivals to 26.3 million, the lowest in five years, from 28 million.

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