Thailand’s economy outpaced expectations in the first quarter to expand at its fastest annual rate in three years.
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However, with exports expected to shrink for a fourth year running and consumption crimped by high household debts and the worst drought in a decade, economists said more fiscal stimulus and lower interest rates might be needed to prevent growth momentum from stalling.
On quarter, Southeast Asia’s second-largest economy grew a seasonally adjusted 0.9 percent in the first quarter, boosted by government spending and tourism, Thailand’s National Economic and Social Development Board (NESDB) said yesterday.
The pace was faster than the 0.8 percent growth recorded in the fourth quarter of last year and 0.6 percent growth forecast in a Reuters poll.
The economy grew 3.2 percent year-on-year, better than the 2.8 percent annual growth posted in the fourth quarter of last year and higher than economists’ estimates.
Thailand’s economy remains fragile two years after a military coup ended months of political unrest as its main growth engines — exports and domestic demand — remain weak.
Despite the upside surprise in GDP, the Bank of Thailand (BOT) could still cut rates if growth falters, economists said.
The BOT held rates steady last week but saw higher risks to growth from slowing consumption and investment.
The NESDB revised its GDP growth forecast for this year from 2.8 to 3.8 percent to 3 to 3.5 percent. Growth last year was 2.8 percent.
Tourism and fiscal spending will underpin growth this year, while expected rains in the middle of the year should ease drought, NESDB secretary-general Porametee Vimolsiri said.
In a bid to spur domestic activity, the Thai government has ramped up investment and launched stimulus measures, although big infrastructure projects have been slow to get underway.
In the first quarter, government investment rose 12.4 percent year-on-year, while private investment grew 2.1 percent.
Tourism, accounting for 10 percent of GDP, has been a rare bright spot. Anti-Chinese sentiment in Taiwan and Hong Kong has resulted in more Chinese tourists going to Thailand.
Tourist numbers in the first quarter jumped 15.5 percent, and the NESDB predicts a record 33 million visitors this year. ■