Thai Q2 GDP growth seen cooling, weak private demand tempers export boost

BANGKOK: Thailand’s economic growth is expected to have cooled slightly in the second quarter, as public and private investment slowed, offsetting some of the boost from stronger exports and tourism.

Growth in South-East Asia’s second-largest economy has lagged its regional peers since the army seized power in 2014 to end months of political unrest.

The junta has ramped up spending to try to boost domestic activity, but large infrastructure projects have been slow getting off the ground.

That has left growth largely reliant on exports, which have started to recover this year, at a time when US trade protectionist rhetoric is on the rise, China’s economy is expected to slow and the baht is strengthening.

Economic growth was projected at 1.0% in the second quarter compared with the first on a seasonally adjusted basis, according to the median of 11 economists polled by Reuters.

The economy had expanded 1.3% in the first quarter, the fastest rate in four years.

Compared with a year earlier, growth was forecast to ease to 3.0% in the June quarter from 3.3% in the March quarter, according to 14 economists who gave on-year forecasts.

“The economy is enjoying something of a cyclical rebound at the moment, helped primarily by a recovery in exports,” said Gareth Leather, economist of Capital Economics.

“Our bigger concerns focus on the poor outlook for domestic demand. High levels of household debt will drag on consumers, while the poor investment climate and political uncertainty will hinder investment,” he said.

Thailand plans an election next year and households typically take a cautious approach ahead of the vote, given the history of recent political unrest.

Private investment has remained weak for more than four years (since 2013) while high household debt has crimped consumption and there is a risk that tighter credit rules may curb spending even more.

Credit card firm Krungthai Card said the rules would hurt spending amid the already weak consumer mood.

While exports rose 8% in the June quarter from a year earlier and the number of tourists increased 7.6%, government investment spending fell nearly 18% as projects have been slower to get started.

Big investment projects are being held up by delays for feasibility studies, bidding, procurement and changes to key officials, officials say.

Two of five double-track rail projects had only recently completed the bidding process after long delays.

“So far this year, public investment spending has disappointed our expectations,” said Lavanya Venkateswaran, economist of Nomura. ”For the second half, we expect public capex spending to pick up as the government remains focused on pushing through delayed projects.” 

The National Economic and Social Development Board, which has forecast 2017 growth of 3.3%-3.8%, will provide a new estimate on Monday. The Reuters poll forecast this year’s growth at 3.4% after last year’s 3.2%. - Reuters