Recovery momentum set to lose steam in Q3

The economy in the third quarter is expected to expand at a softer pace than the second quarter as temporary stimulus measures lose steam, says a senior Bank of Thailand official.

“There is a possibility that GDP growth in the third quarter will not be as high as that in the second since there were special factors which supported the better-than-expected growth in the second quarter,” said Roong Mallikamas, a senior director of the central bank’s macroeconomic and monetary policy department.

Government stimulus measures were among those special factors, she said. The government policy to support the farm sector is expected to help sustain the recovery momentum, but it is not expected to jump-start the economy, said Mrs Roong.

The economy unexpectedly grew 3.3% year-on-year in the first three months to March before accelerating to 3.5% year-on-year in the second quarter, putting first-half growth at 3.4%.

On a quarter-on-quarter seasonally-adjusted basis, GDP growth expanded by 0.9% and 0.8% in the first and second quarters, respectively. The Bank of Thailand forecasts this year’s GDP growth at 3.2%.

The central bank’s outlook contrasts with the Finance Ministry’s prediction that third-quarter economic growth will hit 3.5% — the same level as the preceding quarter.

Mrs Roong said economic data in the first two months of the third quarter showed the recovery momentum still prevailed, but the recovery was not a broad-based improvement as reflected in the tepid private investment.

The Private Investment Index declined by 0.3% year-on-year in August, unchanged from July’s reading, according to central bank data. Private investment was mostly concentrated in the service sector, mostly telecommunications and the retail trade, and investment in manufacturing had not recovered on the back of existing excess capacity.

Capacity utilisation was registered at 65.7% on a seasonally-adjusted basis last month, up slightly from 62.1% recorded a month earlier.

“The decent figure for August’s exports gives us optimism but did not give us the confidence to revise our full-year export forecast [projected at minus 2.5%],” said Mrs Roong.