Thailand’s Q-2 Growth Slowed, Domestic Demand Weak
Thailand’s economic growth slowed in the 2nd Quarter as improving government spending and tourism failed to counter weak local demand and exports, with the outlook clouded by drought and the RMB Yuan’s devaluation.
GDP gained 2.8% in Q-2 from a year earlier, the National Economic and Social Development Board said in Bangkok Monday. That matched the median estimate in a Bloomberg survey, and compares with 3% in the prior frame. GDP grew 0.4% from the prior Quarter.
Thialand’s Prime Minister Prayuth Chan-Ocha said he will reshuffle his cabinet as pressure increases to bolster an economy struggling with a slump in manufacturing and sliding exports. Last week’s unexpected yuan devaluation is an added wrinkle for the government, with the NESDB today cutting its forecasts for GDP growth and overseas sales this year.
“The yuan devaluation is not good news for Thailand, as it will put more pressure on our exports,” Pimonwan Mahujchariyawong, a Bangkok-based economist at Kasikorn Research Co., said before the report. “Government spending and tourism are the only two engines that can drive growth. But the outlook is dimmer now with the yuan move.”
The Thai Baht slipped 0.4% to 35.34 Vs the USD Monday, it is among the worst performers in the past 6 months of 11 Asian currencies tracked.
The Bank of Thailand (BOT) earlier this month left its benchmark interest rate unchanged at a 5-yr low, and said risks persist from the drought and China’s slowdown. The finance ministry has lowered its growth forecast thrice this year, even as the government has pledged higher investment spending in its budget for the FY starting on 1 October.
Manufacturing fell 0.7% in Q-2 from a year earlier, Monday’s data showed. Private consumption grew 1.5%, compared with 2.4% in the previous frame.
Growth outlook for Thailand is fragile, rising Southside risk to growth could bring more monetary easing, monetary easing alone via the interest-rate channel seems insufficient to deal with this, and HeffX-LTN looks for the BOT to allow Baht weakness.
Stay tuned…
HeffX-LTN
Paul Ebeling
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