Thailand signaled growth in the second half of this year may be weaker than previously forecast as a global slowdown hurts exports from Southeast Asia’s second-biggest economy.
Gross domestic product is forecast to expand 5.5 percent to 6 percent, compared with a previous growth range of 5.5 percent to 6.5 percent, Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board, said in Bangkok today. It reduced the forecast for export growth to 7.3 percent from 15.1 percent on concern Europe’s crisis will damp demand, he said.
Thailand’s warning underscores the need for Asian economies to rely on domestic demand for expansion as Europe’s crisis and elevated U.S. unemployment erode export gains. While Thailand joined Malaysia and Indonesia among Southeast Asian nations reporting accelerated growth in the second quarter as policy makers implement fiscal stimulus, its downgraded forecast may reflect regional struggles with sales abroad.
“Thailand’s a little bit of a canary in the coal mine,” said Glenn Maguire, principal at consultant Asia Sentry Advisory Pty Ltd. in North Sydney, Australia, and former Societe Generale chief Asia economist. “It’s an opportune time for Asia’s leaders to once again revisit perhaps looking at another round of fiscal stimulus to offset the global weakening.”
The baht was little changed at 31.52 per dollar as of 3:35 p.m. in Bangkok, according to data compiled by Bloomberg. Thailand’s benchmark SET Index of stocks rose 0.3 percent.
Today’s report showed GDP increased 4.2 percent in the three months through June from a year earlier, after expanding a revised 0.4 percent in the previous quarter, the government agency said. That exceeded all 16 forecasts in a Bloomberg News survey that had a median prediction of a 3.1 percent rise.
The Bank of Thailand kept its policy rate at 3 percent for a fourth meeting last month, and cut its expansion forecast for the year to 5.7 percent from 6 percent. It reduced its export growth estimate to 7 percent from 8.3 percent and said inflation will be 2.9 percent from an earlier prediction of 3.3 percent.
“The stronger data is unlikely to alter the call for easing by the BOT, although the timing might be delayed,” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale SA in Hong Kong. “Export data has already shown weakness.”
In neighboring Myanmar, the economy may grow as much as 8 percent a year over the next decade as inflation remains low and the government increases trade ties with neighbors China and India, according to the Asian Development Bank.
The near-term outlook for Myanmar’s economy, which is a 10th the size of Thailand’s, is “relatively upbeat” because of higher foreign investment and commodity sales, the ADB said in a report today. Annual growth of 8 percent may triple per capita gross domestic product to $3,000 by 2030, it said.
Thai Prime Minister Yingluck Shinawatra, who marked her first year in office this month, has shelved politically contentious legislation to focus on the economy as Thailand recovers from the worst floods in almost 70 years in 2011. Southeast Asian nations from Indonesia to Malaysia have also cut interest rates or increased public spending to boost consumption as Europe’s debt crisis and a faltering U.S. recovery curb exports.
Yingluck’s government has raised minimum wages and pledged to spend more than 2 trillion baht ($63.5 billion) on infrastructure and water-management projects over the next seven years to boost growth and prevent a repeat of the flood disaster, which killed more than 700 people and cost the economy 1.4 trillion baht.
“Economic uncertainty, especially from the euro region, remains a key risk in the second half,” Arkhom said. “We need to accelerate budget spending to boost the local economy.”
Asian stocks fell as concern corporate earnings are deteriorating amid slowing Chinese economic growth offset optimism for the global outlook after U.S. consumer confidence topped estimates. The MSCI Asia Pacific Index was down 0.1 percent at 120.68 at 5:44 p.m. in Tokyo.
Elsewhere in Asia, a government report showed Taiwan’s export orders fell more than economists forecast in July, the fifth straight month of declines.
Orders, an indicator of shipments in the next one to three months, dropped 4.4 percent from a year earlier after a 2.62 percent decline in June, a Ministry of Economic Affairs report in Taipei showed today. The median estimate in a Bloomberg News survey of 12 economists was for a 2.98 percent fall.
In the U.S., the Federal Reserve Bank of Chicago releases its national economic activity index for July, which draws on 85 indicators. In the U.K., home sellers cut asking prices by a record for the month of August, a report today showed. Euro-area construction output for June will be reported today after a gain in May.
In South America, Chile may report that its economy expanded 5.4 percent in the second quarter from a year earlier, compared with 5.6 percent growth in the previous quarter, a survey of economists showed.
Thailand’s economy, the biggest in Southeast Asia after Indonesia, grew 3.3 percent last quarter from three months earlier, compared with a revised 10.8 percent increase in the previous period. The median forecast in a Bloomberg News survey was for a 2 percent gain quarter on quarter.
Thai exports fell 4.2 percent in June from a year earlier, the fourth decline in six months, even as a unit of Toyota Motor Corp. had record local sales this year after supply constraints eased and the Thai government offered as much as 100,000 baht in tax savings for first-time buyers.
Meeting the government’s full-year export growth target of 15 percent will be “difficult,” after shipments contracted by 2.1 percent in the first half, Arkhom said.
“To reach the target, we need to ship $25 billion per month, which is a very high level,” he said.
There is room to adjust monetary policy to support economic growth if needed, and the central bank is ready to do more, it said at the time. Finance Minister Kittiratt Na-Ranong said earlier this month he’d like to see the baht weaken slightly to help exporters and the benchmark rate should be 2.5 percent as inflation is now manageable.