Thai Q4 GDP slumps 11%
2011 growth just 0.1%, but economy expected to bounce back in Q2
BANGKOK: Thailand’s economy, which shrank a record 10.7% in the fourth quarter due to devastating flooding, is expected to bounce back sharply this year as the government and major exporters step up reconstruction spending after the disaster.
While some economists said the worst performance on record in the final quarter of 2011 supported the case for another policy rate cut by the central bank at its next meeting on March 21, others expect it to be left unchanged at 3%.
Growth in 2011 was just 0.1%, dragged down by the country’s worst flooding in half a century that damaged farmland and inundated big industrial zones in October, hitting thousands of factories, particularly car and electronics makers. Many of the affected firms are still shut and may take awhile to reopen.
“Post-flood demand plus government spending for post-flood restoration should be able to support the economy to a certain degree,” said Pimonwan Mahujchariyawong, economist at Kasikorn Research Centre, adding investment from the private sector would also support growth. She expects rates to stay on hold until the end of 2012.
The Bank of Thailand cut its policy rate in November and more recently in January, to help the economy get through the floods, but has said the current rate of 3% is supportive for growth, adding that inflation risks still persist.
“The data does show a negative surprise, but the market should not be too concerned about it ... what we should be concerned with is how the rebound this year will shape up,” said economist Nuchjarin Panarode of Capital Nomura Securities. “We believe the data has implications for a further rate cut at the central bank’s next meeting in March,” she said.
The 10.7% quarterly contraction in SouthEast Asia’s second-largest economy compared with the 7.8% fall expected in a Reuters poll. On a yearly basis, it contracted 9%, worse than economists’ forecast of 5.5%.
The National Economic and Social Development Board (NESDB), which compiles the GDP data, said the real flood impact last year had been much worse than expected, with the damage estimated at about 328 billion baht (Us$10.7bil), or equivalent to 3.7% of GDP. It had predicted economic growth of 1.5% for 2011. In contrast, the Philippine economy grew 3.7% in the fourth quarter from a year earlier, while Malaysia’s annual growth was 5.2% in the final quarter, albeit slowing from the previous three months. The baht was barely changed at 30.74/76 per dollar after the data and continued to trade around the same levels. The stock market was closed when the data came out.
The NESDB also raised its forecast for growth in 2012 to between 5.5% and 6.5 % this year, up from the 4.5% to 5.5 % projected in November, helped by public investment on flood defences and economic policies, including wage increases. This economic boost could add to inflationary pressures.
“Q1 (GDP) will definitely be positive but not much as factories have just recovered. But Q2 will be much better,” said Arkhom Termpittayapaisith, secretary-general of the NESDB, told a news conference. — Reuters