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The Thai economy grew more than expected in the fourth quarter led by exports, strengthening expectations that the central bank may exit stimulus measures soon.
The economy grew by a larger-than-expected 3.6% sequentially in the fourth quarter following the upwardly revised 1.7% expansion seen in the third quarter, the National Economic and Social Development Board announced Monday. Economists expected a 1.3% growth. The growth figure for the third quarter was revised up from 1.3%.
On an annual basis, gross domestic product of Southeast Asia's second-largest economy increased 5.8% in the fourth quarter, logging the first expansion since the last quarter of 2008. The 5.8% annual growth compares to a 2.7% fall in the third quarter. Overall, the Thai economy contracted 2.3% in 2009.
"The data reinforces the 'weak domestic demand-strong external demand' growth pattern, which we expect to persist," ING Bank NV's Asian economist Tim Condon said in a note. The economist noted that three years of political turmoil has hurt domestic demand. He expects political turmoil to persist.
The fourth quarter annual growth was mainly driven by the favorable growth of net exports and a 1.4% rise in household consumption expenditure. Government consumption expenditure increased by 5.2%.
On the other hand, investment still declined by 3.4%, smaller than the 6.3% fall in the third quarter as a result of the continuous expansion in construction. Exports, which equals around 60% of the GDP, showed signs of recovery with 4.1% growth, whereas imports declined 7.6%.
On the production front, agricultural production slipped 2.2%, compared with a fall of 1.5% in the third quarter. Meanwhile, non-agricultural production recorded a significant increase of 6.9%, reversing a fall of 2.8% in the third quarter. The growth was driven by a 9.9% rise in the manufacturing sector as a result of higher export demand especially in computers and equipment, electronics goods, electrical appliances.
Upgrading the growth forecast, Secretary-general at the National Economic and Social Development Board, Ampon Kittiampon said the economy is set to expand between 3.5% and 4.5% this year.
The Bank of Thailand in its Inflation Report said it expects the economic growth in 2010 to be within the range of 3.3% to 5.3% this year. For 2011, the central bank estimates 2.8% to 4.8% growth. In January, the central bank had kept its interest rate unchanged at 1.25%.
ING Bank NV expects the central bank to keep rates on hold until after the U.S. Federal Reserve starts hiking, which is forecast for the third quarter. The bank had last changed the interest rate in April 2009, slashing it by 25 basis points.
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