Thailand Lifts Growth Forecast for Third Time as Export Growth Accelerates
Thailand’s Finance Ministry raised its 2010 economic growth forecast for the third time in six months after exports surged in the first half of the year and local demand recovered.
Gross domestic product may expand 7.3 percent to 7.8 percent in 2010, with a mid-point forecast of 7.5 percent, Satit Rungkasiri, head of the ministry’s Fiscal Policy Office, said today. The ministry in June raised the estimate to as much as 6 percent from a March projection of as much as 5 percent.
Surging overseas sales of electronics and automobiles helped Thailand’s economy expand 9.1 percent in the second quarter, exceeding economists’ forecasts. Satit warned that growth will slow in the second half as the baht strengthens against the dollar and the economic recovery falters in the U.S. and Europe, Thailand’s biggest export markets.
“The high GDP growth forecast for the full year mainly comes from the excellent performance in the first half,” said Pimonwan Mahujchariyawong, an economist at Kasikorn Research Ltd. in Bangkok. “But, the slowing global economy and the baht strength will weigh on the economy in the second half.”
Thailand’s economy will expand 6 percent in the third quarter and 3.3 percent in the last three months of 2010, Satit said. Exports are expected to expand by 25 percent this year and imports may grow 35.6 percent, the finance ministry estimates.
“Exports remain the key driver for the economy as they account for 60 percent of GDP,” Satit said at a briefing in Bangkok. “If economies of our trading partners slow, we will be affected. But, the effect will be less than before because we have diversified our exports to new markets.”
Export Growth Slows
Thailand’s exports increased 23.9 percent to $16.5 billion in August from a year earlier, after rising 20.6 percent in July and 46.3 percent in June, customs data show.
The baht may strengthen to 30 per dollar by the end of this year, Satit said. The central bank’s benchmark interest rate may rise to 2 percent over the same period and to 3 percent next year, from 1.75 percent now, Satit said.
The baht has advanced 8.8 percent this year against the dollar, the second best-performer among major currencies in Asia excluding the yen, according to data compiled by Bloomberg. The currency gained 0.3 percent to 30.59 as of 12:12 p.m. in Bangkok and touched 30.58, the strongest level since August 1997.
“The impact will be felt in coming months,” Kasikorn Research’s Pimonwan said. “We don’t see it now because export orders are booked in advance, but new orders may suffer from price competitiveness. If the baht strengthens beyond 30 and the global economy remains weak, export growth in the fourth quarter may be lower than 10 percent.”
Rising Local Demand
The Bank of Thailand predicted in July that Southeast Asia’s largest economy after Indonesia will grow as much as 7.5 percent, which would be the fastest pace since 1995. The bank said on Aug. 31 the economy “still has growth momentum” in the second half as improving local demand will help offset slowing export growth.
Thailand’s consumer confidence climbed to a 28-month high in August, signaling a recovery in domestic spending, the University of the Thai Chamber of Commerce said this month.
Local consumption will “recover strongly in the fourth quarter and help support growth,” Thanavath Phonvichai, an economist at the university, said on Sept. 9.