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Thailand Growth Slows as Weak Overseas Demand Hurts Exports

Thailand’s Growth Slows as Weak Overseas Demand Hurts Exports
Prime Minister Yingluck Shinawatra extended fuel subsidies and introduced wage increases after last year’s floods to spur domestic demand and offset falling exports. Photographer: Brent Lewin/Bloomberg

Thailand’s growth slowed in the third quarter as cooling global demand hurt the nation’s exports, even as signs of a recovery in China and the U.S. signal the economy may have bottomed.

Gross domestic product increased 3 percent in the three months through September from a year earlier, after expanding a revised 4.4 percent in the previous quarter, the National Economic and Social Development Board said in Bangkok today. The median of 13 estimates in a Bloomberg News survey was 3 percent.

Prime Minister Yingluck Shinawatra extended fuel subsidies and introduced wage increases after last year’s floods to spur domestic demand and offset falling exports. The central bank unexpectedly cut its benchmark rate last month as “insurance” against uncertainties, even as some policy makers in the region signal growing confidence about growth prospects next year.

“We’re pretty upbeat on Thailand for 2013,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said in a Bloomberg Television interview. “We’ve got these government subsidies and policies which are boosting household incomes, and that will certainly support private consumption,” he said, adding that an improving global economy will also help lift Thai exports next year.

The Thai baht rose 0.1 percent against the U.S. dollar as of 10:16 a.m. in Bangkok. It was one of the top gainers last quarter among the 11 most-traded Asian currencies tracked by Bloomberg. The benchmark Stock Exchange of Thailand Index gained 0.2 percent.

Local Demand

Southeast Asia’s growth will remain resilient over the next five years as stronger investment and private consumption reduce dependence on exports for expansion, the Organization for Economic Cooperation and Development said in a report yesterday. Expansion in most Asian economies will probably rebound in 2013, Asian Development Bank President Haruhiko Kuroda said last week.

Thailand today said the economy will grow 5.5 percent this year, compared to an earlier prediction of 5.5 percent to 6 percent. The agency forecast GDP will increase 4.5 percent to 5.5 percent in 2013, and inflation will average 2.5 percent to 3.5 percent, compared with 3 percent this year.

“We expect local demand to grow at a satisfactory level next year,” Arkhom Termpittayapaisith, secretary-general of the state planning agency, said at a media briefing today. “We need to focus on boosting exports.”

Exports may grow 5.5 percent this year and 12.2 percent next year, the agency forecast today.

Minimum Wages

Yingluck’s government raised minimum wages nationwide in April and announced another round of increases from the beginning of 2013. More than 2 trillion baht ($65 billion) in investments in infrastructure and water-management projects is planned over the next seven years to boost growth and prevent a repeat of last year’s flood disaster, which killed more than 700 people and cost the economy an estimated 1.4 trillion baht.

The central bank last month lowered its GDP forecast for next year to 4.6 percent from 5 percent, while maintaining its prediction for this year at 5.7 percent. Governor Prasarn Trairatvorakul said the unexpected cut is not a signal that interest rates are on a downward trend and that monetary policy space should be used “wisely” because of uncertainties ahead.

“We do think the Bank of Thailand will reverse its recent rate cuts in 2013,” Circosta said. “Particularly from mid-2013 onwards, when the global economy starts to look a bit clearer and the inflation picture starts to get a bit more worrying.”

Thailand’s overseas shipments unexpectedly climbed for the first time in four months in September, and the government said it expects export growth to accelerate in the last three months.

Nissan Motor Co., Japan’s second-largest carmaker, this month announced a plan to invest 11 billion baht to build a second factory, while Toyota Motor Corp. said it expects sales in Thailand to increase 72 percent this year to a record.

Thailand’s economy, the biggest in Southeast Asia after Indonesia, grew 1.2 percent last quarter from three months earlier, compared with a revised 2.8 percent increase in the previous period. The median forecast in a Bloomberg News survey was for a 0.3 percent decline.

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