Thai economy grows slower than estimated amid inflation risk

BANGKOK (BLOOMBERG) – The Thai economy grew at a slower pace than economists estimated in the last quarter as the fastest inflation in 14 years probably weighed on sentiment and offset gains from the return of foreign tourists.

Gross domestic product rose 2.5 per cent in the April to June period from a year ago, the National Economic and Social Development Council (NESDC) said on Monday (Aug 15). This was below the median estimate for a 3.1 per cent expansion in a Bloomberg survey. Output expanded 0.7 per cent compared with the first quarter against a median estimate of 0.9 per cent growth.

Officials see full-year growth in the range of 2.7 per cent to 3.2 per cent, slower than the 3.3 per cent pace seen by Prime Minister Prayut Chan-o-cha earlier this month. This puts Thailand on course for the slowest expansion in the South-east Asian region in 2022, as it struggles with inflation at the quickest since 2008.

The baht fell the most in more than three weeks after growth came in weaker than estimated, with the currency down 0.5 per cent to 35.516 against the United States dollar on Monday morning. NESDC sees the baht averaging at 34.5 to 35.5 per dollar this year.

Thailand’s central bank last week lifted borrowing costs by a quarter point, the first increase since 2018, to tame price gains and support the baht. Policymakers also vowed to keep the pace of tightening gradual so as to not stifle the economy’s recovery momentum.

Any intensification of the war in Ukraine remains a key risk to Thailand’s recovery, NESDC secretary-general Danucha Pichayanan said after the data release.

Geopolitical tensions have expanded to Asia with China and Taiwan, which may lead to supply disruptions in the auto and electronics sectors as Thailand imports 29 per cent of semiconductors from Taiwan, he said.

Still, the government’s forecast for foreign visitor arrivals to return to 30 million levels next year from near 10 million this year bodes well for the economy, where tourism accounts for more than 10 per cent of GDP.