Thailand May Say Economy Shrank After Flooding Shut Honda, Canon Factories

Thailand’s economy probably contracted in the fourth quarter, as the worst floods in almost 70 years forced companies from Honda Motor Co. to Canon Inc. to shut plants and evacuate workers.

Gross domestic product shrank 4.3 percent in the three months through December from a year earlier, according to the median of 11 estimates in a Bloomberg News survey. That compares with a 3.5 percent expansion in the previous quarter and would be the first decline since 2009. The report is due Feb. 20 at 9:30 a.m. in Bangkok.

The floods that killed more than 700 people and inundated two-thirds of the country dented exports already hurt by weakening demand in Europe, and became an added drag on Japan’s economy as supply chains were disrupted. Prime Minister Yingluck Shinawatra has pledged to spend 350 billion baht ($11 billion) on infrastructure and the Bank of Thailand cut the benchmark interest rate for a second straight meeting in January.

“The worst has passed, but the economic recovery may not be that fast because it will take time for the government spending to kick in,” said Santitarn Sathirathai, a Singapore- based economist at Credit Suisse Group AG. The central bank has “room to maneuver” on rates, and may pause for a while to see how the economy performs, he said.

The baht has gained more than 2 percent against the dollar this year, and the benchmark SET Index of stocks has risen more than 9 percent.

‘Downside Risks’

Policy makers from Indonesia to the Philippines have also eased borrowing costs as the protracted European debt crisis hurts demand for their countries’ exports, damping growth.

Taiwan’s economy expanded 1.9 percent from a year earlier last quarter, the slowest pace in more than two years, according to preliminary data released on Jan. 31. A final report is due on Feb. 22. Malaysia’s growth slowed last quarter, and the central bank said this week a more challenging external environment could present “greater downside risks.”

Singapore’s economy contracted last quarter, and near-term indicators aren’t pointing at an “imminent rebound,” the Ministry of Trade and Industry said yesterday.

Thailand’s monetary authority earlier this month lowered its 2011 GDP growth estimate to 1 percent, and said risks posed by the worsening global outlook and the impact of last year’s floods were greater than the threat of inflation. It has forecast the nation’s economy will expand 4.9 percent this year.

The Bank of Thailand will start distributing low-interest loans in early March to individuals and small- and medium-sized companies affected by flooding, Assistant Governor Pongpen Ruengvirayudh said yesterday. The central bank earlier said it planned to disburse 300 billion baht of so-called soft loans.

Toshiba, Fujitsu

Thailand’s manufacturing index fell for the fourth consecutive month and exports dropped for the second month in December after floods disrupted production, prompting manufacturers including Honda, Toshiba Corp. and Fujitsu Ltd. to cut their profit forecasts last month. Zurich Financial Services AG said this week its fourth-quarter profit fell 46 percent after losses from the floods and other natural disasters.

Exports are forecast to increase by between 1 percent and 5 percent in the first quarter, and the Ministry of Commerce has targeted a 15 percent increase in overseas shipments this year.

Inflation slowed for the second consecutive month in January, and consumer confidence rose for the second straight month. Still, political uncertainty and rising energy costs are undermining sentiment, and economic recovery remained fragile, the University of the Thai Chamber of Commerce said last week.

“Looking into the first half of 2012, risks to growth are still skewed to the downside, given the global risk environment and the delayed post-flood recovery in manufacturing production,” said Usara Wilaipich, a Bangkok-based economist at Standard Chartered Plc.

To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at; Michael Munoz in Hong Kong at

To contact the editor responsible for this story: Stephanie Phang at

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.