Thai Economy Averts Recession as Outlook Improves After Coup

Thailand’s economy expanded more than estimated in the second quarter as local demand recovered after a military coup ended months of political unrest. The baht advanced.

Gross domestic product rose 0.9 percent in the three months through June from the previous quarter, when it shrank a revised 1.9 percent, the National Economic & Social Development Board said in Bangkok today. The median of 16 estimates in a Bloomberg News survey was for 0.7 percent growth. The economy expanded 0.4 percent from a year earlier, compared to a survey estimate for no change.

Junta leader Prayuth Chan-Ocha, who seized power on May 22, has paid money due to rice farmers, capped fuel prices and outlined plans for a new government to revive confidence. There will be a “steady economic recovery” in the second half of the year, the state planning agency said today, while cutting the upper range of its growth forecast for 2014 to 2 percent.

“Second-quarter GDP confirms the stabilization in economic activity,” said Weiwen Ng, a Singapore-based economist at Australia & New Zealand Banking Group Ltd. As the political outlook turns constructive, “we expect the unlocking of fiscal spending to manifest itself in a V-shaped recovery for Thailand in the second half,” he said.

The baht gained 0.2 percent to 31.807 against the dollar as of 10:36 a.m. local time. It reached 31.763, the highest level since July 29, and is the second-best performer in the past three months in Asia among 11 currencies tracked by Bloomberg. The benchmark SET Index was little changed.

Export Constraints

The state planning agency today said it forecasts full-year growth at 1.5 to 2 percent from a range of 1.5 percent to 2.5 percent projected in May. The economy may expand 3.5 percent to 4.5 percent in 2015, it said. It cut its export growth estimate for this year to 2 percent from 3.7 percent.

“Even though the economy will recover in the second half and government spending will return to normal, exports still face constraints,” Arkhom Termpittayapaisith, secretary-general of the state planning agency, told a news conference. “Private investment is also expected to recover slowly.” The agency had skipped its press conference for GDP data the previous two quarters because of the unrest.

Thai consumer confidence rose to the highest in 11 months in July, data earlier this month showed. Exports climbed in June for the first time in four months.

The central bank earlier this month kept its policy interest rate unchanged for a third straight meeting, and said it expects a “V-shaped” recovery in the second half on rising consumption and government spending. The monetary authority has lowered its growth forecast for this year to 1.5 percent.

Private Consumption

Private consumption rose 0.2 percent in the second quarter from a year earlier, expanding for the first time in four quarters, today’s data showed. Exports slipped 0.7 percent, while investment fell 6.9 percent.

Elsewhere in the region, Malaysia last week said the economy grew at a stronger-than-estimated 6.4 percent pace last quarter, while Singapore reported an unexpected expansion.

Prayuth has said Thai elections can’t be held until late-2015 at the earliest and could be delayed further if the situation is deemed unstable. The junta has written an interim constitution that gives it absolute power and appointed a National Legislative Assembly dominated by the military. The assembly may name a new prime minister as early as this week.

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