Thailand’s Q3 GDP much weaker than expected

November 19, 2018

BANGKOK - Thailand's economy unexpectedly stagnated in Q3, and this has translated to annual growth of 3.3%, the weakest since Q4 2016.

ANZ Bank says the lack of q/q growth reflects weakness in the agricultural sector, which contracted by 8.0% q/q on a seasonally-adjusted basis in Q3. In contrast, the non-agricultural sector expanded by 0.6% q/q, up from 0.3% in Q2.

Exports fell 4% q/q, with services exports down 5% q/q. ANZ said this presumably reflects weakness in the tourism sector due to a decline in Chinese tourists following a ferry tragedy in July.

In y/y terms, exports declined by 0.1%.

Domestic demand readings were more encouraging, with investment growth rebounding 0.8% q/q in Q3 following a 0.7% fall in the previous quarter.

Private consumption growth expanded 1.0% q/q, slower than the strong pace seen in H1 but still robust by the standards of recent years.

In y/y terms, private consumption, Government spending, and investment growth all picked up. However, an inventory build-up was also a key contributor to headline growth.

Looking ahead, ANZ expects growth to regain some momentum in coming quarters, and says the Government's infrastructure investment programme, expected to gather pace in 2019, should provide a key support to growth.

The bank says it is now putting its 4.5% growth forecast for 2018 under review. The National Economic and Social Development Board (NESDB) now expects Thailand's 2018 growth to come in at 4.2%, the lower bound of its earlier projection range of 4.2-4.7%.

ANZ says the latest economic data also challenges its call for the Bank of Thailand to initiate policy normalisation in December.

"The timing of the central bank's first rate rise since 2011 will be data dependent, and robust numbers for October are needed to prevent a delay," it says. (ATI).