Thai Q4 GDP slows but govt maintains 2018 outlook on solid exports

Bangkok

Thailand's economy posted its strongest growth in five years last year, with solid exports and tourism giving the government confidence to maintain the country's growth outlook for 2018.

While the economy grew slightly less than expected in the fourth quarter as state spending slowed, resilient exports prompted the government on Monday to raise its outlook for exports, which have been the economy's main engine of growth.

Exporters, however, face tougher challenges ahead from rising US trade protectionism and a strong baht, hovering at four-year highs. It was down 0.1 per cent after the data.

The economy grew a seasonally adjusted 0.5 per cent in October-December from the previous three months, National Economic and Social Development Board (NESDB) data showed, slower than 0.7 per cent forecast in a Reuters poll and 1.0 per cent growth in the previous quarter.

On an annual basis, growth was 4.0 per cent, lower than a median forecast of 4.4 per cent, and the July-September quarter's 4.3 per cent expansion, which was the fastest annual pace since January-March 2013.

The NESDB maintained its 2018 economic growth forecast at 3.6-4.6 percent, after the economy grew 3.9 percent in 2017.

Tim Leelahaphan, economist at Standard Chartered, said he was sticking to his above consensus outlook of 4.3 percent growth for 2018.

"Global economic growth and higher commodity prices, robust import growth - which markets overlook - suggests a strong foundation for export growth in 2018." The government raised its 2018 export growth outlook to 6.8 per cent from 5 percent. Thailand's exports, worth about two-thirds of the economy, jumped nearly 10 per cent in 2017 after years of underperforming its Asian peers.

Southeast Asia's second-largest economy has posted better headline growth in the last few years underpinned by a solid global economic recovery, but it is still far from firing on all cylinders.

Growth remains heavily reliant on exports, and the boost from trade has been slow to percolate into the broader economy.

Private investment and consumption continue to lag, restrained by high household debt, and excess industrial capacity remains an issue.

Hoping for more ballast from the domestic economy, Thailand's government has said growth will be driven by fiscal spending and big infrastructure projects.

Annual exports in the December quarter jumped 11.6 per cent, private consumption rose 3.5 per cent, and private investment edged up 2.4 per cent. Public investment contracted 6 per cent, NESDB data showed.

Fourth quarter growth was dragged by a fall in the agricultural sector due to flooding. It shrank 1.3 per cent on-year compared with a 9.7 per cent jump in the September quarter.

With inflation subdued, Thailand's central bank is expected to keep interest rates unchanged all of this year near record lows. Its policy rate has been held steady at 1.50 per cent since April 2015. It next reviews policy on March 28.

NESDB chief Porametee Vimolsiri, also a rate-setting committee member, said Thailand was in no rush to raise rates as the economy was still in recovery while inflation remained below target. Policymakers are also increasingly anxious about the impact of the strong exchange rate, with the Bank of Thailand saying last month it was ready to act if the baht rises too fast.

Earlier this month, the BOT eased capital controls to allow more outflows in a bid to take some pressure off the currency.REUTERS