Analysts: Q2 reading may show slower GDP growth

Thailand’s economic growth may have cooled in the second quarter as higher imports offset a boost from robust exports and tourism, economists say.

In the April-to-June quarter, the economy likely grew 4.6% year-on-year and 1.1% from the first quarter on a seasonally adjusted basis, said Somprawin Manprasert, chief economist and executive vicepresident of Bank of Ayudhya.

Thai GDP in the first quarter rose by 4.8% year-on-year, the fastest pace in five years. With seasonal adjustments, firstquarter GDP grew by 2% over the previous three months.

“The Thai economy continued to gain traction in the second quarter, driven by a gradual recovery in domestic consumption in addition to exports and tourism,” Mr Somprawin said.

Private consumption continued to increase in the three months through June, he said, thanks to the higher income of farm households and the government’s welfare and subsidies for lowincome earners.

Non-farm income jumped to 6.2% yearon-year in the second quarter, compared with a 2.3% year-on-year fall in the previous quarter.

The NESDB, the government’s think tank, is due to release the country’s GDP reading for the second quarter on Aug 20.

Although exports in the second half are expected to have grown at a slower pace than in the first half, largely due to a high-base effect, this would be offset by stronger domestic consumption, Mr Somprawin said.

“It won’t be difficult for Thai economic growth to achieve the 4.7% economic growth forecast this year if quarter-onquarter seasonally adjusted growth in 2018 averages 1%,” he said.

Amonthep Chawla, head of research at CIMB Thai Bank, agreed with Mr Somprawin, saying the Thai economy in the April-to-June period continued to grow but likely at a softer pace than in the previous three months.

He is, however, more pessimistic than Mr Somprawin, predicting that GDP likely expanded by 4% in the second quarter from a year earlier and 0.5% quarter-to-quarter on a seasonally adjusted basis.

“The first quarter’s 4.8% was a surprise,” Mr Amonthep said.

Exports and tourism remained growth drivers in the second quarter, he said, while domestic consumption gradually improved as the recovery in both non-farm and farm income remained fragile.

Healthy growth for machinery imports was seen in the three months through June, as strong exports prompted manufacturers to buy new machinery. This activity helped revitalise private investment, Mr Amonthep said, adding that such imports were aimed at substituting workers, so growth in nonfarm income was limited.

Net exports fell because of accelerated imports, and this slowed growth in the second quarter as income earned from exports did not spill over, he said.

“The overall economic growth is not inclusive yet,” he said. “Grassroots people are not enjoying benefits.”

Mr Amonthep forecasts economic growth in the second half to improve from the April-to-June quarter but fall short of the robust performance of the first quarter.