Thai Economy Grows In Q2, Recovers From Recession

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Thailand's economy grew in the second quarter on a quarterly basis, after contracting in the preceding two quarters, signaling that the economy has emerged from a recession.

Monday, the National Economic and Social Development Board said the country's gross domestic product rose a seasonally adjusted 2.3% sequentially in the second quarter, reversing from a 1.8% drop in the first quarter and a 5.9% fall in the fourth quarter. The growth came in line with economists' expectations.

On the expenditure side, the quarterly growth was boosted by 4.8% rise in the gross fixed capital formation. Private final consumption expenditure climbed 0.8%, while government consumption expenditure was up 1%. However, exports declined 4.3%, which accentuated the impact of a 8.9% increase in imports.

On the income side, the construction sector grew 6.6% in the second quarter, faster than the 4% rise in the first quarter, with the sector seeing the fastest growth among the sectors. This was followed by a 6.2% rise in manufacturing, coming in after a 6.6% fall in the first quarter. At the same time, the services sector remained flat, while the agricultural sector contracted 1.6%.

Year-on-year, the gross domestic product contracted an unadjusted 4.9% in the second quarter, less severe compared to a 7.1% fall in the first quarter. Economists expected the economy to contract 5.1%. This was the third consecutive quarter that the economy showed a contraction.

The improvement in the GDP on a year-on-year basis, was mainly due to a 5.9% rise in government expenditure. However, household consumption fell 2.3% and private investment dropped 10.1%. On the external front, exports in dollar terms declined 26.1%, while imports fell at a faster pace of 32.3%.

Sector-wise, the agriculture sector contracted 2.7%, while the non-agricultural sector was down 5%. Within the non-agricultural sector, manufacturing sector dropped 8.4%, while wholesale and retail trade fell 3.3%. Transport and communication sectors fell 7.6% and hotels and restaurants contracted 5.6%.

However, the construction sector rose 2.5% and the financial intermediation sector showed a growth of 5.6%.

Earlier last month, Thailand's central bank lowered its economic outlook for the economy, to show a 4.5% GDP decline in 2009 compared to the 3.5% drop expected in April. However, the central bank expects 5% growth in 2010, up from its earlier forecast of a 3.5% expansion.

The headline inflation for the year is forecast to be between a 1.5% fall to a flat reading, while for the next year, inflation is projected to be in the range of 3.5% to 5.5%.

Thailand's economy grew in the second quarter on a quarterly basis, after contracting in the preceding two quarters, signaling that the economy has emerged from a recession. (Market News Provided by RTTNews)