Thailand's Economy Expands More Than Estimated as Exports Counter Turmoil
Thailand’s Economy Grows More Than Estimated
Adam Oswell/Bloomberg
The country’s exports jumped 46 percent in June from a year earlier, the most in more than 18 years.
The country’s exports jumped 46 percent in June from a year earlier, the most in more than 18 years. Photographer: Adam Oswell/Bloomberg
July 5 (Bloomberg) -- Bank of Thailand Deputy Governor Bandid Nijathaworn talked with Bloomberg's Haslinda Amin from Bangkok on July 2 about the outlook for the country's economy and central bank monetary policy. Thailand will consider raising its benchmark interest rate, Bandid said, after the nation’s worst political violence in almost two decades ended without derailing the recovery. Thailand has refrained from joining Taiwan, Malaysia, India and Australia in raising borrowing costs this year, choosing to keep its benchmark rate at 1.25 percent in June as local political unrest and Europe’s sovereign-debt crisis threatened the economy. (Source: Bloomberg)
Tourists walk through a street market in Bangkok
Brent Lewin/Bloomberg
Tourists walk through a street market on Sukhumvit Road in Bangkok. Thailand's tourists arrivals have recovered after dropping 13% froma year earlier in May, when riots erupted across Bangkok.
Tourists walk through a street market on Sukhumvit Road in Bangkok. Thailand's tourists arrivals have recovered after dropping 13% froma year earlier in May, when riots erupted across Bangkok. Photographer: Brent Lewin/Bloomberg
MBK shopping mall in Bangkok
Brent Lewin/Bloomberg
People use the escalators at MBK shopping mall in Bangkok. Thai consumer confidence rose for the third straight month in July.
People use the escalators at MBK shopping mall in Bangkok. Thai consumer confidence rose for the third straight month in July. Photographer: Brent Lewin/Bloomberg
Thai baht banknotes and coins
Jeremy Horner/Bloomberg
Thailand's baht has climbed 2.8 percent against the dollar since May 19, when troops broke up anti-government protests after clashes killed at least 89 people.
Thailand's baht has climbed 2.8 percent against the dollar since May 19, when troops broke up anti-government protests after clashes killed at least 89 people. Photographer: Jeremy Horner/Bloomberg
Thailand’s economy expanded more than estimated last quarter as surging exports countered the impact of political turmoil, supporting gains in the nation’s currency and stocks.
Gross domestic product rose 9.1 percent in the three months through June from a year earlier, the government said in Bangkok today. That compared with the 8 percent median estimate in a Bloomberg News survey of 11 economists. The economy grew 12 percent in the first quarter, the fastest pace since 1995, the report showed.
Thailand’s baht has climbed 2.8 percent against the dollar since May 19, when troops broke up anti-government protests after clashes killed at least 89 people. The government today urged the central bank to ensure its monetary policy doesn’t spur a currency strengthening that will hurt exports, as Governor Tarisa Watanagase considers whether to raise interest rates further this week after last month’s move.
“The stronger-than-expected data is one of the supporting factors for another rate hike,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “The export and manufacturing sectors have been so strong and the economy will probably be kept steady going forward. The currency will continue to see appreciation pressure.”
Export Competitiveness
Thailand’s benchmark stock index rose as much as 0.8 percent after the GDP report, before paring gains to trade little changed at 4:15 p.m. in Bangkok. The baht climbed 0.2 percent to 31.47 per dollar, according to data compiled by Bloomberg.
Eleven of twelve economists surveyed by Bloomberg News predict the central bank will increase its benchmark rate by a quarter of a percentage point to 1.75 percent on Aug. 25. The Bank of Thailand raised the rate last month for the first time in almost two years, joining Malaysia, South Korea and India in boosting borrowing costs.
“The central bank should be careful to make sure monetary policy won’t affect rising investment,” Ampon Kittiampon, secretary-general at the National Economic and Social Development Board, the government’s economic advisory body, said in Bangkok today. “A higher interest-rate trend may attract capital inflows and strengthen the baht, which may affect our export competitiveness.”
Exports of cars and electronics have jumped and tourists are returning to Phuket’s beaches, with Finance Minister Korn Chatikavanij predicting this month the economy may expand as much as 8 percent this year, more than his ministry’s June forecast of as much as 6 percent. Thailand is a manufacturing base for companies including Toyota City, Japan-based Toyota Motor Corp.
Growth Peaked
“Growth has peaked in the first half,” Ampon said at a briefing in Bangkok today. “Even though our growth in the second half won’t be as high as 10 percent, we will be fine as long as we have political stability.”
The economic advisory agency, which releases separate growth forecasts from the finance ministry and the central bank, raised its 2010 GDP forecast to a range of 7 percent to 7.5 percent today from a May estimate of as much as 4.5 percent. The economy may expand 4 percent to 5 percent next year, it said.
The central bank also expects 2010 growth of as much as 7.5 percent, which would be the strongest pace since 1995, before the collapse of the baht in 1997 helped trigger the Asian financial crisis, in which Thailand, Indonesia and South Korea were forced to seek International Monetary Fund bailouts.
Exports Cooling
The country’s exports jumped 46 percent in June from a year earlier, the most in more than 18 years, before cooling to a 20.6 percent pace last month. The slowdown in July prompted Commerce Minister Porntiva Nakasai to say last week the Thai baht’s strength is a “risk” to the country’s overseas sales, and the central bank should “take care” of the currency.
The baht had its best week in more than five months last week after Governor Tarisa said on Aug. 18 that the central bank is “not concerned” about the currency’s gains, provided it moves in line with those in the region.
The easing export growth in July “does place a limit on how much more appreciation exporters and authorities can stomach,” said Lim Su Sian, a Singapore-based economist at Royal Bank of Scotland Group Plc, said before today’s report. “We are definitely at the brink of a slower export trend regionally.”
The central bank has said that overseas sales may ease in the second half amid signs of cooling demand in the global economy, even as the government raised its 2010 export growth target to at least 20 percent.
Singapore Exports
Overseas demand, which has lifted export-dependent Asian economies including Singapore and China, may falter as governments in Europe embark on austerity programs to cut deficits and households in some of the world’s largest economies hold back spending. Singapore’s exports rose at a less-than- estimated pace in July as shipments of pharmaceuticals and electronics cooled.
“The economy has been running mostly on one leg, the export sector,” said Usara Wilaipich, an economist at Standard Chartered Plc in Bangkok. “Support from external demand will fade due to weaker global growth led by the cooling of China’s economy and structural problems in the U.S. At the same time, domestic demand is unlikely to recover fast enough to offset the slowdown in exports.”
Thailand’s economic growth may slow to a range of 6 percent to 7 percent this quarter and 1 percent to 2 percent in the fourth quarter, Ampon said. The expansion in the second half may cool to about 4 percent to 5 percent from 10.6 percent in the first six months, he said.
Aircraft Shortages
Still, Thailand’s tourist arrivals have recovered after dropping 13 percent from a year earlier in May, when riots erupted across Bangkok and damaged the nation’s biggest shopping mall. Last month, the number of foreign tourists rose 14 percent to 1.25 million, according to the Office of Tourism Development.
The tourism recovery has been “quick” and arrivals will rise by 5 percent to 10 percent to at least 15 million visitors this year, Ampon said.
Thai Airways International Pcl said Aug. 11 the return of tourists after the protests has revived the risk of aircraft shortages. Thai consumer confidence rose for the third straight month in July.
“I’m more upbeat in the second half,” Viboon Kromadit, chief operating officer of Amata Corp., Thailand’s biggest industrial land developer by market value, told investors on Aug. 17. “Foreign investors are returning to Thailand again after the end of the political crisis. I have appointments with new clients every day as they are looking for new manufacturing facilities here.”
The economy grew 0.2 percent in the April-to-June period from the previous three months, the government said today. That compared with the median forecast for a 1.4 percent contraction in a Bloomberg survey of eight economists.
To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
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