Thai economic growth slowed for a second quarter as exports cooled and local demand weakened, with rising household debt restricting the scope for monetary easing.
Gross domestic product increased 2.8% in the three months through June from a year earlier, after expanding a revised 5.4% in the previous quarter, the National Economic and Social Development Board said in Bangkok on Monday. The median of 16 estimates in a Bloomberg survey was 3.3%.
Southeast Asian countries in general have seen exports falter as growth slows in China, and Europe and Japan struggle to sustain economic recovery.
The Bank of Thailand will hold the policy interest rate at 2.5% at its Aug 21 meeting, a Bloomberg survey showed, after Assistant Governor Paiboon Kittisrikangwan said last month that household debt at 80% of GDP limits the scope for further easing.
"High credit growth and rising household debt narrow the prospect for a further lowering of interest rates," Bernard Aw, a Singapore-based analyst at Forecast Pte, said before the data release. "Status quo on the policy is the best way forward."
The Thai baht has slipped almost 5% against the United States dollar in the past three months, after reaching its highest level since 1997 in April. The benchmark Stock Exchange of Thailand Index has lost more than 10% over the last three months, among the worst performers in Asia.
The central bank cut its 2013 GDP growth forecast to 4.2% from 5.1% on July 19, citing weaker-than-expected exports. The Commerce Ministry said last month it is "very difficult" to meet its growth target of as much as 8% because of slowing expansions of the country's trading partners. Thai shipments grew 0.95% in the first six months.
Delayed Spending
The Thai central bank reduced borrowing costs by 25 basis points in May to spur growth. Singapore last week lowered its forecast for exports this year, while Indonesia this month reported second-quarter GDP growth of less than 6% for the first time since 2010.
Thai consumer confidence fell to the lowest in seven months in July on rising political unrest and the weakening economic outlook. Prime Minister Yingluck Shinawatra imposed the Internal Security Act for eight days this month to contain protests as the parliament debated an amnesty bill for political protesters.
Toyota Motor Corp said last month industrywide car sales will fall 9.5% this year in Thailand. The government has tried to speed up its budget disbursements as two trillion baht ($64 billion) allocated for infrastructure spending and 350 billion baht for water-management projects have been put on hold.
Thailand's economy shrank a seasonally adjusted 0.3% last quarter from the three months through March, when it contracted a revised 1.7%, the agency said on Monday.