Thai economic growth accelerates in Q2, economy to grow 3.5 pct in 2017 - ANZ

Thai economic growth accelerated in in the second quarter of this year. The GDP growth rose to 3.7 percent year-on-year. However, a more widespread rebound continues to be elusive.

The economic growth surpassed market expectations yet again. External trade and public consumption continued to underpin the headline growth that maintained a 1.3 percent quarter-on-quarter expansion rate, faster than implied by projections. The annual acceleration in GDP growth mask the consistent weakness in private domestic demand. Household spending, which accounts for a little more than half of GDP, eased to 3 percent year-on-year from 3.25 percent in the first quarter.

Investment activity continued to weigh on the economic growth. Total investment came in at 0.4 percent, pulling back from the first quarter’s 1.7 percent, marking two consecutive quarters of easing. While private investment is indicating some signs of improvement, it is still shrinking.

In order for the recovery to sustain, domestic demand should pick up, noted ANZ in a research report. While goods trade and tourism have given a comfortable cushion to growth, the continuously low utilization rate would limit further gains in GDP.

In all, the Thai economy is expected to grow 3.5 percent for the whole of 2017, at the lower end of the government’s forecast range of 3.5 percent to 4 percent, stated ANZ. The softness in private domestic demand is expected to keep inflationary pressures at bay. Therefore, the Bank of Thailand is expected to keep policy rate on hold through 2017, added ANZ.

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