Thread: Thailand Economy Shrinks, Prompting Worries of Recession

This was reported in may 2014.

BANGKOK — Thailand’s economy shrank more than expected in the first quarter, data showed on Monday, as exports remained weak and months of political unrest threatened to tip the economy into recession.

The state planning agency, which compiles data on gross domestic product, said the economy had contracted a 2.1 percent in the January-to-March quarter, compared with the previous three months. The first quarter recorded a contraction of 0.6 percent from a year earlier.

The agency, the National Economic and Social Development Board, lowered its G.D.P. growth forecast for the year to 1.5 to 2.5 percent, from 3 to 4 percent.

The country has been governed since December by a caretaker administration with limited fiscal powers, and the crisis seems likely to continue as protest groups seek to install an unelected government.

The outlook for the April-to-June quarter and beyond is grim, analysts say.

“Chances are, we are going to see another technical recession in the economy, given that the second-quarter G.D.P. number is likely to be rather poor as well,” said Gundy Cahyadi, an economist with DBS Bank in Singapore.

“The longer the economy is without a functioning government, the more the drag to economic growth,” he added.

Consumer confidence is at a 12-year low, tourists are staying away from Bangkok and public spending has been delayed. Many parts of the economy are feeling the pinch, even the property sector, which proved resilient during previous bouts of unrest.

“If the political crisis drags on until the end of this year, the overall sector could see a contraction of as much as 10 percent,” Rutt Phanijphand, chief executive of the home builder Quality Houses, said last week.

The planning agency revised the figure for fourth-quarter growth to 0.1 percent from the previous three months from 0.6 percent. It left year-on-year growth for the October-December quarter at 0.6 percent.

Thailand, the second-biggest economy in Southeast Asia, is the only one in the region that is contracting. Malaysia reported annual growth of 6.1 percent in the first quarter, while Indonesia, the largest regional economy, this month announced its slowest growth in years, although its annualized growth in the January-March quarter was still 5.2 percent.

Given the lack of a functioning government and the worsening economy, there may be increasing pressure on the central bank to cut its benchmark rate at its June 18 policy meeting. In April, it left the rate unchanged at 2 percent.

“The weaker-than-expected G.D.P. data will put the spotlight back on the Bank of Thailand,” said Benjamin Shatil, an economist with J. P. Morgan in Singapore. “But when domestic activity is being weighed down by falling sentiment amid an uncertain political environment, there is only limited support that monetary policy can provide to the economy.”

The political turmoil is also hurting Thailand’s big auto sector, which accounts for 11 percent of G.D.P. and is the largest in Southeast Asia. Domestic car sales are falling and about 30,000 industry jobs have been lost his year.


Thai Airways last week reported a quarterly loss and expects further losses in the second and third quarters. “We have been severely affected by the politics,” said its chairman, Prajin Juntong.

Tourism accounts for about 10 percent of G.D.P., and the number of visitors dropped about 5 percent in the January to April from a year earlier.

This month, the Tourism Authority of Thailand cut its forecast for 2014 tourist arrivals to 26.3 million, the lowest number in five years, from 28 million.

Pornthip Hirunkate, vice president of the Tourism Council of Thailand, said political unrest had probably contributed to the loss of about 100 billion baht, or $3 billion, in tourism revenue so far.

More than 60 percent of Thai G.D.P. comes from exports, and some analysts expect these to start to pick up along with a global recovery. So far, the political unrest has been largely contained to Bangkok and has not disrupted ports and factories.

But the state planning agency on Monday cut its projection for export growth this year to 3.7 percent, down from an earlier forecast of 5 to 7 percent.

“The unrest has had a minimal impact on shipments, and most exporters are still confident about business,” said Nopporn Thepsitthar, chairman of the National Shippers’ Council. He expects exports to grow 2 to 3 percent in the second quarter, compared with a year earlier.

In the January-to-March quarter, exports fell 0.8 percent from a year earlier and about 0.5 percent from the previous three months, central bank data showed.

And here's a update on its current account.


Thailand Current Account | 1991-2014 | Data | Chart | Calendar | Forecast

What is your analysis of these economic indicators?