Thai Economy Probably Grew Most Since `95 Before Crisis Flared
Thailand’s economy probably expanded at the fastest pace in 14 years last quarter, a recovery now endangered by the nation’s worst political violence in 18 years that’s shuttered sections of Bangkok and decimated tourism.
Gross domestic product rose 9 percent in the three months to March 31 from a year earlier, after growing 5.8 percent in the previous quarter, according to the median of nine estimates in a Bloomberg News survey ahead of the May 24 government report. That would be the highest reading since the third quarter of 1995.
Asian economies have benefited from an export rebound that’s helped lift growth from Singapore to Taiwan, an acceleration that may be slowed should Europe’s debt crisis hamper the global recovery. Thailand may be among the most vulnerable because its domestic demand is endangered by the protests and rioting that killed more than 80 people.
“We have seen quite strong numbers this year from output to exports to consumption,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “However, from here on, we will definitely see negative impact from the political crisis on the economy. Thailand will lag behind its peers in the region.”
Thailand’s economy probably grew at least 10 percent in the first quarter compared with the same period a year earlier, and will expand this year, Finance Minister Korn Chatikavanij said in Tokyo today.
Rioting erupted across Bangkok on May 19 after Thai security forces backed by armored vehicles cleared an anti- government protest camp and forced its leaders to surrender. More than 30 buildings were set alight, including the Stock Exchange of Thailand’s building, the nation’s biggest shopping complex owned by Central Pattana Pcl and at least eight branches of Bangkok Bank Pcl, the country’s biggest lender.
The military said late yesterday it ended its mission to disperse protesters and will now assist police enforcing a 9 p.m. to 5 a.m. curfew in a third of the country.
The unrest may cause Thailand’s economy to contract this quarter compared with the previous three months, said economists including David Cohen of Action Economics and Pimonwan Mahujchariyawong of Kasikorn Research Co. GDP probably expanded a seasonally adjusted 1.7 percent last quarter from the previous three months after a 3.6 percent gain in the December quarter, according to the median forecast of six economists surveyed by Bloomberg News.
The baht has dropped 0.7 percent in the past month and overseas investors dumped Thai shares on May 19 for an 11th day, the longest stretch of net sales since November 2008. The stock market was closed yesterday and will remain shut today.
The cost of credit-default swaps insuring Thai government debt from default rose 21 basis points to 163 basis points as of 8:54 a.m. in Singapore today, according to Royal Bank of Scotland Group Plc prices.
Prime Minister Abhisit Vejjajiva’s government has already seen consumer confidence drop to a nine-month low, leaving economic growth reliant on exports. The central bank forecasts that Southeast Asia’s largest economy after Indonesia may grow as much as 5.8 percent this year on overseas demand.
Thailand’s economic fundamentals remain “promising” if the government can quickly deal with the political unrest, bourse president Patareeya Benjapolchai said in an interview with Bloomberg Television today. “Investors will come back.”
Japan, Singapore and Taiwan yesterday reported growth in their economies accelerated last quarter as companies from Nissan Motor Co. to Taiwan Semiconductor Manufacturing Co. increase exports and domestic spending strengthens. Still, Asian stocks fell today as European leaders struggled to contain the region’s debt crisis, raising the risk of a slowdown in exports.
Fiscal woes may push Europe into a “double-dip” recession while growth in advanced nations will be “anemic,” New York University professor Nouriel Roubini said this month. The European Union and the International Monetary Fund have offered as much as 750 billion euros ($940 billion) to countries in danger of financial instability.
The Bank of Thailand last month kept the benchmark one-day bond repurchase rate unchanged at 1.25 percent, the lowest level since July 2004, saying it “views the heightened political risk as a key factor affecting confidence, tourism, private consumption and investment.” Thailand’s central bank will next meet to decide on the key rate on June 2.
The impact from the political turmoil on the economy “is going to weigh again on the central bank when they meet in June,” said Yougesh Khatri, a senior economist at Nomura Holdings Inc. in Singapore. “If the economy slows down given the situation, the central bank’s impetus to normalize interest rates lessen.”