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Thai Q3 GDP grows at best annual pace in years, despite soft domestic demand

[BANGKOK] - Thailand posted third-quarter economic data that shows it is on a firmer recovery track, after years of sluggishness, though economists say it needs higher private investment and government spending to stay there sustainably.

While the growth pace moderated from April-June on a quarterly basis, it beat market expectations.

Exports and tourism have lifted growth for Southeast Asia's second largest economy this year, though Thailand's pace still lags that of peers.

Keeping down Thai growth has been still-soft domestic demand and delays in the start of big infrastructure projects.

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On an annual basis, the economy expanded 4.3 per cent in the third quarter, the best pace for any period since the first quarter of 2013, the National Economic and Social Development Board (NESDB) said on Monday.

That handily beat the Reuters poll median of 3.8 per cent and was also above its highest forecast. Annual growth for April-June was revised to 3.8 per cent, from 3.7 per cent.

On a quarterly basis, gross domestic product (GDP) grew a seasonally adjusted 1.0 per cent in July-September.

That topped the 0.75 per cent Reuters poll forecast, but was below the previous period's pace, revised up to 1.4 per cent from 1.3 per cent.

"The momentum may have softened slightly but it has still remained solid for three consecutive quarters. So, I'm not too worried," said Charnon Boonnuch, economist of Tisco Securities.

He said quarterly growth could soften further in the year's final period, but the 2018 outlook remains strong.

The planning agency revised its 2017 growth forecast to 3.9 per cent, from 3.5-4.0 per cent seen in August, and forecast 2018's level at 3.6-4.6 per cent.

Exports this year are now seen rising 8.6 per cent instead of 5.7 per cent, despite the baht being at its strongest in more than two years. In the third quarter, exports jumped 12.5 per cent.

"External demand has so far provided ample cushion to growth," ANZ said. "However, the government expects export growth to moderate to 5 per cent next year, as the favourable base effect would fade from Q4 onwards."

In ANZ's view, private investment "must pick up if the recovery is to deepen in 2018."

Government consumption expenditure rose by 2.8 per cent in July-September from a year earlier but dropped 4.1 percent from the previous three months. Public investment fell 2.6 per cent on the year because of delays in some investment projects, NESDB head Porametee Vimolsiri told a briefing.

He said public investment spending is expected to surge by 11.8 per cent next year from just 1.8 per cent projected for this year, as more projects, worth more than 300 billion baht (S$12.41 billion), are in the bidding process.

"We are confident that growth in Q4 will remain high, making this year's growth outlook at 3.9 per cent and reaching 4 per cent next year," Porametee said.

Porametee, a member of the central bank committee that decides monetary policy, said that even though global interest rates are trending up, Thailand has no need to rush to tighten policy until economic recovery is "clear".

The central bank has left its benchmark interest rate unchanged at 1.50 per cent since April 2015. It next reviews policy on Dec 20, at the year's final meeting.

Most economists expect no policy change well into 2018, as inflation is benign.


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