Thailand Q1 GDP growth beats market expectations, fails to accompany rising inflationary pressures

Thailand’s gross domestic product (GDP) for the first quarter of this year significantly outperformed the market’s expectations. It increased 4.8 percent y/y (2.0 percent q/q sa). The quarterly rise was the fastest since Q4 2012.

Equally important is that the acceleration was broad-based, putting to rest concerns that Thailand’s recovery is lacking breadth. However, the strengthening growth trajectory is not as yet been accompanied by rising inflationary pressures and therefore, monetary policy can remain accommodative, according to the latest report from ANZ Research.

The breadth of the acceleration in growth was the most notable feature of Q1 GDP data. Barring exports which slightly moderated to 6 percent y/y from 7.4 percent y/y previously, all other components accelerated during the quarter. Private consumption strengthened to 3.6 percent y/y from 3.4 percent y/y previously while investment recorded growth of 3.4 percent y/y. For full-year 2017, investment had increased by a meagre 0.9 percent y/y.

From the supply side, agricultural output (including fishing) expanded 6.5 percent y/y, reversing a contraction of 1.3 percent y/y in the previous quarter. This turnaround presumably resulted in higher incomes and consumption in the rural sector. Growth in non-agriculture GDP remained unchanged at 4.7 percent y/y.

"This strong performance has come in an environment of benign inflation, implying that monetary policy can stay accommodative. Thailand’s growth-inflation mix remains favorable," the report added.

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