Thai economy struggles to recover from political turmoil

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Thai coupThailand’s economy continued to struggle in the second quarter of the year but appeared to grow from the first, a top central bank official said Monday.

Don Nakornthab, a director at the Bank of Thailand, said that gross domestic product from April through June likely grew 1 per cent over the previous period, when the economy contracted 2.1 per cent from the last quarter of 2013.

Months of political turmoil have taken a toll on the economy, despite steps by the new military government to boost confidence after seizing power just over a month ago.

Nakornthab said the economy likely contracted 0.4 per cent in the second quarter compared with the same period in 2013. With Thailand’s gross domestic product growth already shrinking 0.6 per cent in the first quarter of this year compared with the same period the year before, the Bank of Thailand’s assessment suggests that the country’s economy, once one of Southeast Asia’s strongest, has seen only a slight recovery.

Exports, for instance, were valued at $19.26 billion, down 1.2 per cent from the same time of last year.

That was largely blamed on falling prices for sugar and rubber as well as supply shortages of shrimp products. Thailand’s billion-dollar shrimp industry has been hit hard by a bacterial infection that has ravaged shrimp stocks since late 2012.

The total value of imports was $17.63 billion, a 7.7 per cent decline from May of 2013, the central bank said.

Tourism was off 10.7 per cent in May from the previous May, with the most recent figure at 1.7 million foreign visitors. Tourism is one of the country’s most important sectors, contributing around 9 per cent to the local economy.

Meanwhile, Thailand’s current account – the difference between a nation’s savings and investment – registered a deficit of $664 million in May, wider than $643 million a month earlier, due to an acceleration in profit and dividend outflows by foreign companies and a drop in tourism income.

There are signs that the outlook is improving, however. While the country’s Private Investment Index – a gauge of investment activity by the private sector – contracted 2.9 per cent in May from a year earlier, the index picked up 0.6 per cent on month on a seasonally adjusted basis.

The Private Consumption Index – a gauge of local consumption activity – declined 0.3 per cent in May from the same month in 2013 but rose 0.5 per cent from April on a seasonally adjusted basis, the central bank added.

“There [is] evidence of recovery, albeit a gradual one,” said Nalin Chutchotitham, an economist at HSBC in Bangkok. She said it was especially evident as the PCI had seen positive gains in the past three months while the PII saw a relatively strong month on month gain in May.

Signs of the economy gaining strength have been felt since the army staged a coup May 22, saying it was needed to end months of sometimes violent political turmoil that had battered the economy.

Since taking over, the military has extended tax cuts, pledged to relaunch infrastructure projects – including tackling the creaky rail network and flooding problems – and released some of the $2.7 billion owed to farmers under a controversial rice subsidy programme.

The coup has been criticised by the US and the European Union but the military intervention has been cited as a reason behind the first recovery of consumer confidence in 14 months in May as well as improved sentiment among investors.

“The rebound in consumer and business confidence indices also signals better prospects for consumption and investment ahead,” added Chutchotitham of HSBC.

The Bank of Thailand says the improved political stability following the military takeover will start being seen in economic numbers soon.

“The local economy has definitely bottomed out since April,” Nakornthab of BOT said. “But the economic improvement should be more markedly visible in June.”

Bangkok-based Kasikorn Research Center, or KResearch, a leading local research agency, said in a note released Monday that it also expects the economy to pick up steam.

“Various economic policy implementations and the speeding up of the government budget disbursement (by the junta) will likely boost Thailand’s on-year economic growth to 3.3-4.7 per cent during the latter half of the year,” KResearch said.

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Reading Time: 3 minutes

Thailand’s economy continued to struggle in the second quarter of the year but appeared to grow from the first, a top central bank official said Monday.

Reading Time: 3 minutes

Thai coupThailand’s economy continued to struggle in the second quarter of the year but appeared to grow from the first, a top central bank official said Monday.

Don Nakornthab, a director at the Bank of Thailand, said that gross domestic product from April through June likely grew 1 per cent over the previous period, when the economy contracted 2.1 per cent from the last quarter of 2013.

Months of political turmoil have taken a toll on the economy, despite steps by the new military government to boost confidence after seizing power just over a month ago.

Nakornthab said the economy likely contracted 0.4 per cent in the second quarter compared with the same period in 2013. With Thailand’s gross domestic product growth already shrinking 0.6 per cent in the first quarter of this year compared with the same period the year before, the Bank of Thailand’s assessment suggests that the country’s economy, once one of Southeast Asia’s strongest, has seen only a slight recovery.

Exports, for instance, were valued at $19.26 billion, down 1.2 per cent from the same time of last year.

That was largely blamed on falling prices for sugar and rubber as well as supply shortages of shrimp products. Thailand’s billion-dollar shrimp industry has been hit hard by a bacterial infection that has ravaged shrimp stocks since late 2012.

The total value of imports was $17.63 billion, a 7.7 per cent decline from May of 2013, the central bank said.

Tourism was off 10.7 per cent in May from the previous May, with the most recent figure at 1.7 million foreign visitors. Tourism is one of the country’s most important sectors, contributing around 9 per cent to the local economy.

Meanwhile, Thailand’s current account – the difference between a nation’s savings and investment – registered a deficit of $664 million in May, wider than $643 million a month earlier, due to an acceleration in profit and dividend outflows by foreign companies and a drop in tourism income.

There are signs that the outlook is improving, however. While the country’s Private Investment Index – a gauge of investment activity by the private sector – contracted 2.9 per cent in May from a year earlier, the index picked up 0.6 per cent on month on a seasonally adjusted basis.

The Private Consumption Index – a gauge of local consumption activity – declined 0.3 per cent in May from the same month in 2013 but rose 0.5 per cent from April on a seasonally adjusted basis, the central bank added.

“There [is] evidence of recovery, albeit a gradual one,” said Nalin Chutchotitham, an economist at HSBC in Bangkok. She said it was especially evident as the PCI had seen positive gains in the past three months while the PII saw a relatively strong month on month gain in May.

Signs of the economy gaining strength have been felt since the army staged a coup May 22, saying it was needed to end months of sometimes violent political turmoil that had battered the economy.

Since taking over, the military has extended tax cuts, pledged to relaunch infrastructure projects – including tackling the creaky rail network and flooding problems – and released some of the $2.7 billion owed to farmers under a controversial rice subsidy programme.

The coup has been criticised by the US and the European Union but the military intervention has been cited as a reason behind the first recovery of consumer confidence in 14 months in May as well as improved sentiment among investors.

“The rebound in consumer and business confidence indices also signals better prospects for consumption and investment ahead,” added Chutchotitham of HSBC.

The Bank of Thailand says the improved political stability following the military takeover will start being seen in economic numbers soon.

“The local economy has definitely bottomed out since April,” Nakornthab of BOT said. “But the economic improvement should be more markedly visible in June.”

Bangkok-based Kasikorn Research Center, or KResearch, a leading local research agency, said in a note released Monday that it also expects the economy to pick up steam.

“Various economic policy implementations and the speeding up of the government budget disbursement (by the junta) will likely boost Thailand’s on-year economic growth to 3.3-4.7 per cent during the latter half of the year,” KResearch said.

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