Exports and local consumption boost economy

Economic growth accelerated in the fourth quarter on rising exports and local demand, reducing pressure on the central bank for further interest rate cuts.

  • Published: 18/02/2013 at 04:37 PM
  • Newspaper section: topstories

A Bloomberg survey found that 13 of 15 economists expected the Bank of Thailand's (BoT) one-day bond repurchase rate to remain unchanged at 2.75%. Two expected a 25 basis-point reduction.

The Bank of Thailand's Monetary Policy Committee will meet on Wednesday.

Gross domestic product (GDP) increased 18.9% in the three months through December from a year earlier, after expanding to a revised 3.1% in the previous quarter, the National Economic and Social Development Board (NESDB) said on Monday.

The economy grew 6.4% in 2012 from 0.1% in 2011, when a deluge swamped most of the country bringing a large part of the industrial sector to a halt.

Prasarn Trairatvorakul (Bloomberg Photo)

The BoT last month held borrowing costs for a second meeting and central bank governor Prasarn Trairatvorakul said he was under no pressure to lower rates even after Finance Minister Kittiratt Na-Ranong renewed calls for an easing to cool the baht's gains.

"Keeping rates low for a long time may lead to asset bubbles," Mr Prasarn has said.

Analysts did not expect the rates to be slashed on Wednesday.

"Consumption and investment should continue to grow this year," Benjarong Suwankiri, an economist at TMB Bank, said before the data release.

"Given the firm economic fundamentals, there is no reason for the central bank to ease monetary policy to stimulate the economy further," he said, adding that there is mounting political pressure for a rate cut.

"We're not looking for any more interest-rate cuts from Thailand, Malaysia, Indonesia or the Philippines,'' said Robert Prior-Wandesforde, a Singapore-based economist at Credit Suisse Group AG.

"Growth is sufficiently robust now to mean that the chances of policy-rate reductions are pretty low, and indeed the chances of interest-rate hikes in some of these countries before the end of the year are higher.''

The baht has advanced more than 5% against the US dollar in the past six months, the biggest gainer among 11 widely traded Asian currencies tracked by Bloomberg. The benchmark SET Index reached the highest level since November 1994 last week.

The central bank last month raised its 2013 GDP forecast to 4.9% from an earlier prediction of 4.6%, while maintaining its projection for export growth at 9%. Overseas sales increased for a fourth month in December, and the manufacturing index climbed for a third straight month.

The NESDB on Monday estimated the country's economy could grow between 4.5% and 5.5% this year as the global economy continues to recover.

The NESDB reported that major economic powers such as China, Europe and the US are starting to pick up. The government's investments in megaprojects will also help stimulate the country's economy and local demand.

Inflation would be in the range of 2.5% to 3.5% for the entire year 2013, according to the forecast.

But it warned that capital movement is one of the key risk factors this year because the baht's heavy fluctuation could put pressure on the economy.

The Thai economy is weathering an uneven global recovery better than its larger neighbour Indonesia, which expanded 6.1% last quarter, the slowest pace in more than two years. The Philippines grew 6.8%, and its central bank has said it is considering more measures to counter the impact of inflows on the peso, which has recently strengthened to a record level.

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