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Thai GDP Growth Slows as Unrest Increases Rate-Cut Pressure

People browse market stalls outside the Siam Center shopping mall in Bangkok. Photographer: Dario Pignatelli/Bloomberg
People browse market stalls outside the Siam Center shopping mall in Bangkok. Photographer: Dario Pignatelli/Bloomberg

Feb. 17 (Bloomberg) -- Thailand’s economy grew at the slowest pace in almost two years last quarter as political unrest hurt local demand and tourism, increasing pressure on the central bank to cut interest rates and support expansion.

Gross domestic product rose 0.6 percent in the three months through December from a year earlier, the National Economic & Social Development Board said in Bangkok today. The expansion was the smallest since the first quarter of 2012, based on previously reported data. The median estimate in a Bloomberg survey was 0.3 percent. The economy grew 2.9 percent in 2013 from a revised 6.5 percent in 2012.

The anti-government protests will impact investment and tourism and disrupt the nation’s policy making, the World Bank said last week. The central bank unexpectedly held borrowing costs at its meeting last month, surprising economists who had predicted a cut. The state planning agency today cut its 2014 GDP growth forecast to 3 percent to 4 percent from a range of 4 percent to 5 percent earlier.

“The data today confirmed the impact of the protests on the economy,” said Wee-Khoon Chong, head of rates strategy Asia ex-Japan at Nomura Holdings Inc. in Singapore. “It is likely to worsen further this quarter, given ongoing uncertainty over the election. The tone in the recent Bank of Thailand statement remained dovish and supports our view for 50-basis-point rate cuts over the next few meetings.”

Consumption Affected

The Thai baht slipped 0.1 percent to 32.365 against the U.S. dollar as of 11:11 a.m. in Bangkok after touching 32.28 earlier, the strongest level since Dec. 19. The benchmark Stock Exchange of Thailand Index rose 0.6 percent, lower than a 0.7 percent gain for the MSCI Asia Pacific Index.

Demonstrations against Prime Minister Yingluck Shinawatra that began Oct. 31 have killed 11 people and injured more than 600, paralyzed parts of the capital and disrupted a national election on Feb. 2. Fitch Ratings said this month prolonged political confrontations could impair economic performance and undermine the nation’s credit strength.

Thai consumer confidence fell to the lowest in more than two years in January, after Yingluck declared a state of emergency in Bangkok to curb violence. Delayed payments to rice farmers have affected local consumption, Governor Prasarn Trairatvorakul said last month, while the tourism council predicts visitor arrivals may slide by 7.3 percent in the first quarter from a year earlier.

The unrest may also hurt new investments as companies consider other options, and even existing investors like Toyota Motor Corp. may be hesitant in their commitments, Kyoichi Tanada, president of Toyota’s Thai unit, said Jan. 20.

Estimates Cut

The NESDB today cut its investment growth forecast for this year to 3.1 percent from 7.1 percent earlier, largely on lower public spending. It also cut its consumption growth prediction to 1.6 percent from 2.9 percent. Exports may rise 5 percent to 7 percent this year, it said.

The economy expanded 0.6 percent in the fourth quarter from the three months through September, today’s report showed. Growth last quarter slowed from a 2.7 percent pace reported in the third quarter from a year earlier.

The protest movement has waned in recent weeks, with numbers dwindling to fewer than 100 at some demonstration sites. Bank of Thailand spokeswoman Roong Mallikamas said last week the benchmark interest rate is still accommodative and that the decision whether or not to cut the rate depends on the economic situation. The next meeting is scheduled for March 12.

“With domestic demand struggling, the external sector’s performance will be key to Thailand’s overall growth outlook,” said Krystal Tan, a Singapore-based economist at Capital Economics Ltd. “With fiscal policy effectively paralyzed, the central bank must take the burden of responsibility for supporting the economy.”

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at

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

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