BEHIND THE NUMBERS
If anything, this year has proved the Thai economy is able to stand on its own feet. It's the year that domestic growth ploughed ahead against the backdrop of a slowdown in exports. Over three quarters, the economy expanded by 2.6% year-on-year. Not much, you may think, but recall that in the first quarter of this year we emerged from major flooding, so you can pencil out any manufacturing activity for one whole quarter.
The boost from private consumption and investment returned in the aftermath of the floods, lifting Thai economic activity in the second and third quarters and bringing economic growth back to a solid expansion path. The strength of domestic growth was due to the highest quarterly rates since 2004 of the two contributors in the third quarter, at 6% year-on-year for private consumption and 15.5% for investment, while exports of goods and services contracted 2.8% year-on-year in the same quarter. So yes, the Thai economy can expand even when exports are stagnant, but it requires a tremendous amount of growth from all domestic sectors at the same time, not just consumption.
Such strong domestic demand has led to a surge in imports, generating a trade deficit for the first 10 months of 2012 at US$14.3 billion. One has to go all the way back to 1996 to find a trade deficit this high. But all in all, including fourth-quarter expansion from the low base of the last quarter of 2011 (when the soaked economy contracted by 9.3%), we expect the economy to expand at a nice round number of 5% this year.
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