World Economy

Thai Growth to Moderate After Peaking in Q2

Santitarn SathirathaiSantitarn Sathirathai

Thailand’s economic growth may have peaked in the second quarter and the economy will likely expand less than 3% in the latter half as southern bombings take their toll, Credit Suisse predicted.

Earlier on Monday, figures released by the National Economic and Social Development Board showed second-quarter GDP growth was up slightly at 3.5% year-on-year and 0.8% on quarter, NewsNow reported.

The April-June growth rate surprised the market but “the best is likely behind us in terms of year-on-year growth rates”, the Swiss bank said.

It expected growth to moderate to less than 3% in the second half of 2016, said Santitarn Sathirathai, emerging markets economic researcher at the Swiss financial services holding company.

“We expect moderation in merchandise exports and decline in tourism, the key pillar of growth, post the tragic bombing to likely weigh on economic recovery in the second half,” he said.

Private consumption provided a major lift to GDP in the second quarter, growing 3.8% year-on-year from 2.3% year-on-year earlier, the strongest since the first quarter in 2013.

It was boosted partly by stimulus measures to promote domestic tourism, as well as aggressive promotion campaigns by auto retailers to sell new models, he said.

Santitarn pointed out that private investment grew 0.1% year-on-year, weakening from the already subdued rate of 2.1% in the first quarter, and private construction swung to -2.1% year-on-year.

Likely downswing in exports and tourism could be the key drags on growth in the second half of this year, he said. Credit Suisse set the full year GDP projection at 2.7%.

“Last week’s tragic bombing in the southern part of Thailand presents a clear risk to growth outlook in the second half of this year. Tourism revenue accounts for 10% of GDP in Thailand,” he said.

Government spending and private consumption should help support growth going forward, Santitarn said.

Meanwhile, business confidence has improved slightly to its highest point in the last year, boosted by the huge public sector investment in megaprojects, according to a Krungthai Bank second quarter survey.

KTB senior executive vice present Poonpat Sripleng said last Wednesday the bank surveyed about 2,600 businesspeople for their opinions in compiling the Krungthai Business Index.

The economic confidence index stood at 50.43 points, the highest in four quarters, while the confidence index for the next three months was at 50.95, up from 50.18.