Economy grew faster than expected in first quarter

Thailand’s economy has outpaced the forecasts of most analysts, posting a 3.2 percent growth rate in the first quarter of 2016, its highest rate in three years, as stronger consumption and investments counterbalanced a contraction in exports.

The 3.2 percent growth rate was, however, close to the 3.1 percent forecast by the central bank, said Pornpen Sodsricha, head of the Macroeconomic Office at the Bank of Thailand. Pornpen attributed the rise to growth in the service sector – and in particular tourism – along with increased public spending, but she also noted that private consumption moved up by 2.3 percent and public consumption by 8 percent on a quarterly basis.

The central bank has forecast growth of 3 to 3.5 percent in 2016. Last week, it maintained its key policy rate at 1.5 percent, but warned that downside risks to the economy remain. Those risks center mainly on exports, which the bank has predicted will contract this year by 1. 7 percent.

Exports contracted 1.4 percent during the first quarter.  In terms of volume exports actually rose 1.1 percent, but fell in value by 2.4 percent on continued weakness in the economies of some of Thailand’s key trading partners.

Thai National Shippers Council Chairman Nopporn Thepsithar said he is optimistic the economy will continue to steadily recover this year and foresees growth of between 3-3.5 percent, driven by the solid expansion in tourism and investment.

“Key factors to drive the economy this year are tourism and investment in the government’s infrastructure development projects and private investment, which would follow the government’s investment,” he said.

Although private consumption rose 2.3 percent, that was a slight decrease compared to the 2.6 percent rise in the last quarter of 2015. Bank of Thailand officials said that the prolonged drought had negatively impacted consumption in many farming households.

Tim Leelahaphan, Thailand economist at Maybank Kim Eng Securities, told The Nation newspaper that first-quarter results indicated domestic demand was picking up, but the markets were too pessimistic about Thai growth.

“We see domestic demand is growing. One could speculate that this was due to the ramping up of production before the great number of holidays in April and May, but more data is needed to confirm this. We maintain our above-street view and currently have this year’s growth at 4 percent, against the market forecast of 3.2 percent,” he said.
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