ECONOMY

ECONOMY

Growth declines to 2.6% in Q2

Supply disruptions take toll on exports

Economic growth this year has been revised down to a range of 3.5% to 4% from the previous projection of 3.5% to 4.5% due to the impact from the slow global economy.

Growth decelerated in the second quarter of this year to 2.6% after auto and electronic exports had dropped as a result of the supply chain disruption following the earthquake and tsunami in Japan.
Global economic growth was revised down to a range of 3.6% to 4% this year from between 3.8% and 4.2% earlier as a result of the debt crises in the US and Europe, especially in Spain and Italy.
The Thai export growth projection was in turn cut to 16.5% from 17%.
The National Economic and Social Development Board (NESDB) yesterday lowered its economic growth forecast even though Thai exports to the troubled markets account for only 10% of the total. The country's main markets in Asia remain promising.
However, capital inflows to Asia have strengthened the baht, projected in the range of 29.50 to 30.50 baht to the US dollar.
Oil prices are expected to soar with Dubai crude projected at US$103-107 a barrel this year, an upward revision from $98-107.
NESDB secretary-general Arkhom Termpittayapaisith said inflation was revised up to the range of 3.6% to 4% from 3% to 3.8% due to the high oil prices.
New government investment could be delayed until next February, resulting in a possible 1.5% year-on-year contraction this year, compared with 3.5% growth in the previous projection.
The second-quarter 2.6% growth was a 0.2% contraction from the first quarter, when the economy grew by 3.2% year-on-year. The quarterly economic growth rates last year were 12%, 9.2%, 6.6% and 3.8%, respectively.
The slower second-quarter growth was caused by lower exports of automobiles and electronic products in the aftermath of the march 11 Japanese disaster. Thailand is the largest automobile production base in Southeast Asia.
Jewellery exports to the US and Europe also dipped while government expenditures contracted by 9.9%.
First-half economic growth was 2.9%, but the government's think-tank agency forecast 5% expansion for the second half, supported by improved automobile and electronic exports.
On a bright note, Mr Arkhom said the tourism sector would grow at a faster pace this year, with a projection of 19 million foreign visitors, up from 18 million.
The agency has yet to project the growth figure for next year, but it is possible that the government's policy of increasing incomes and spurring domestic consumption will help to drive growth up by one percentage point.
Meanwhile, Citigroup suggested currency investors buy Indian rupees, which have been a big underperformer, and sell baht due to economic growth concerns.
The 2.6% second-quarter growth was a full percentage point lower than the median estimate of 3.6% by economists surveyed by Bloomberg.
Wellian Wiranto, an HSBC economist, said the second-quarter gross domestic product came much softer than expected, driven primarily by supply chain disruptions that hurt exports and pre-election caution that hurt investments.