Q2 growth slows but still impresses
4.6% reading slips from Q1’s revised 4.9%
The economy expanded at a slower pace in the second quarter, but the government’s think tank is maintaining its growth forecast for 2018 at 4.2-4.7%, while raising the forecast for exports.
The National Economic and Social Development Board (NESDB) reported yesterday that GDP in the second quarter grew by 4.6% year-on-year, easing from the first quarter’s revised reading of 4.9%, the highest in five years.
Nonetheless, the growth figure topped the results for the fourth quarter of 2017 and the whole of 2017, which were 4% and 3.9%, respectively.
The NESDB attributed second-quarter growth to an acceleration of private consumption, along with external demand and continuous expansion of both private and public investment.
On the production side, the agricultural sector grew by 10.4%, up from a 6.5% rise in the previous quarter.
The non-agricultural sector expanded by 4.1%, down from 4.8% in the first quarter on a slowdown in manufacturing and tourismrelated service sectors.
Private final consumption expenditure increased by 4.5%, accelerating from 3.7% in the first quarter. Government final consumption expenditure rose by 1.4%, slowing down from 1.9% previously.
Gross fixed capital formation increased by 3.6%, accelerating from 3.4% in the previous quarter due mainly to public investment with an increase of 4.9%, compared with 4.0% in the first quarter along with a 3.2% rise of private investment accelerating from 3.1% previously.
For the external sector, exports and imports of goods and services rose by 6.4% and 7.5% respectively, compared to 6.0% and 8.7% in the first quarter.
After seasonal adjustment, the economy in the second quarter expanded by 1.0% from the previous three months.
For the first half of 2018, the economy expanded by 4.8% year-on-year.
NESDB secretary-general Thosaporn Sirisamphand said the second-half expansion is likely to slow from the first half because of base effects, widespread flooding and a drop in the number of tourists.
Under such conditions, the economy in 2018 is projected to grow 4.2-4.7% or an average of 4.5%, unchanged from the previous projection released on May 21.
The NESDB raised its 2018 export growth forecast to 10% from the 8.9% estimated in May, as it expects shipments to be underpinned by improving trade partners’ economies.
Exports, one of the key drivers of the economy, were strong during April-June, up 12.3% year-on-year.
JPMorgan said the second-quarter GDP report suggests firm underlying demand momentum, which it expects to persist through the second half of the year.
The investment bank is looking for continued fiscal support and stabilising credit growth, which should support domestic activity even as the external demand environment remains uncertain.
“Assuming a slightly softer 3.5% quarteron-quarter seasonally-adjusted annual rate average pace of growth in the next couple of quarters, full-year GDP growth should settle at 4.7% year-on-year, up from 4.5% in the prior forecast,” JPMorgan said. “Given the stronger underpinnings for growth, the policy focus is expected to shift to financial stability concerns and we thus maintain our view for a 25-basis-point hike. Incoming data through September will be important in guiding the timing of policy normalisation.”
Policy focus is expected to shift to financial stability concerns. JPMORGAN