Dec. 3 (Bloomberg) -- Thailand's economy grew faster than economists expected in the third quarter, buoyed by exports and a recovery in spending almost a year after a military coup.

Southeast Asia's second-biggest economy expanded 4.9 percent in the three months ended Sept. 30 from a year earlier, compared with a revised 4.3 percent gain in the second quarter, the government said today. The median estimate of 14 economists surveyed by Bloomberg News was 4.4 percent.

``It's a surprise and underscores the point there is a lot of pent up consumption and investment demand,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore, who had expected a 4.8 percent pace. ``There have been almost two years of little or no investment spending so we can expect this to carry through to next year.''

Thailand's central bank will probably keep its key interest rate unchanged at a third meeting tomorrow as local demand started to pick up after five consecutive cuts from January. The military-installed government plans elections this month to restore democracy and revive an economy blighted since the coup.

Thailand's key stock index slipped 1.8 percent to 831.12. The baht was little changed at 33.84 per dollar.

Slowest Pace

Still, the nation's third-quarter growth was the slowest among six Southeast Asian countries tracked by Bloomberg, with Singapore's 8.9 percent pace the fastest and Indonesia's 6.5 percent the second slowest.

The Thai economy will expand 4.3 percent this year, based on the median of 11 of the economists' predictions. That would be the slowest since 2001 and compares with the government's 4.5 percent forecast.

``There are very good signs that household consumption has started to rebound,'' Ampon Kittiampon, secretary general of the National Economic and Social Development Board, or NESDB, the government's economic advisory agency, told a press conference today. ``Investment in the manufacturing sector has also increased as exporters expand their production to meet rising overseas orders.''

Thailand has been relying on exports, which account for about 60 percent of the economy, to spur growth. Shipments grew 3.5 percent in the third-quarter, slowing from a 7.6 percent increase in the previous three months. Exports will grow 10 percent in 2008, Ampon said.

Waning Exports

Slowing global expansion puts Thailand's main growth driver at risk. The International Monetary Fund last month lowered its forecast for global expansion next year to 4.8 percent from 5.2 percent in July, mostly because of a weaker economy in the U.S., Thailand's second-largest market after the European Union.

Private consumption, which accounts for about half of the economy, rose 1.9 percent from a year earlier in the third quarter, accelerating from 0.9 percent in the previous period.

Consumer spending is showing signs of recovery after the Bank of Thailand lowered its benchmark interest rate to 3.25 percent in the longest string of rate cuts since at least May 2000. Business sentiment has recovered from an all-time low in April to the highest level in 10 months.

New vehicle sales in Thailand, Southeast Asia's biggest automobile market, rose 3.3 percent in the third quarter, rebounding from a 6.4 percent drop in the previous three months, according to Toyota Motor Corp.'s Thai unit. Land & Houses Pcl, Thailand's largest homebuilder by sales, said third-quarter profit more than doubled from a year earlier as demand recovered.

Investments Increase

Total investment in the third quarter rose 2.6 percent, accelerating from a 0.2 percent gain in the previous quarter, today's data showed.

``There was growth in both public and private investment,'' Ampon said. ``The government accelerated its spending to spur economic growth and manufacturers in several sectors reached full capacity and began to buy more machinery to expand production.''

Manufacturing gained 5.8 percent in the third quarter from a 4.5 percent expansion in previous three months. Construction growth slowed to 1.4 percent from 1.7 percent.

Gross fixed capital formation grew 2.6 percent, compared with a 0.2 percent gain in the previous quarter. Government spending increased 9.8 percent, more than the second quarter's 9.2 percent pace.

Faster Inflation

Accelerating inflation may prompt the Bank of Thailand to keep its interest rate unchanged at a meeting of policy makers tomorrow. The consumer price index rose 3 percent in November from a year earlier, the Commerce Ministry said today. That's the fastest pace in 10 months and follows October's 2.5 percent gain. The median of 13 economists' estimates in a Bloomberg News survey was 2.9 percent.

Inflation this year will probably average 2.3 percent and accelerate to within a 3 percent to 3.5 percent range, Ampon said today, citing the effect of higher food and fuel costs.

Thais go the polls on Dec. 23 to elect a government. The military ousted Prime Minister Thaksin Shinawatra in a September 2006 coup saying he was corrupt and the junta-backed court banned his political party, which won a two-thirds parliamentary majority when Thais last voted in 2005.

Thailand's $206 billion economy may expand by between 4 percent and 5 percent next year, the NESDB's Ampon said. Economists in a Bloomberg survey expect growth of 4.8 percent in 2008.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net

Last Updated: December 3, 2007 05:32 EST