Economic growth tilts up in Q4 but politics loom

Economic growth tilts up in Q4 but politics loom

Skyscrapers are illuminated by moonlight at dawn on Sept 26, 2018 in Bangkok. Construction of luxury high rise residences is booming in the city, driven partly by strong demand from wealthy Chinese and other foreign investors, contributing to economic growth. (AP file photo)
Skyscrapers are illuminated by moonlight at dawn on Sept 26, 2018 in Bangkok. Construction of luxury high rise residences is booming in the city, driven partly by strong demand from wealthy Chinese and other foreign investors, contributing to economic growth. (AP file photo)

The country’s economy grew at a faster pace in the fourth quarter than the previous three months, as local demand helped to offset a slide in exports, but Thailand's ongoing political divide is again threatening the economy.

Gross domestic product (GDP) rose 3.7% from a year ago, up from a revised 3.2% in the third quarter, the National Economic and Social Development Council (NESDC) said on Monday. The median estimate of 23 economists in a Bloomberg survey was for expansion of 3.6%.

GDP rose a seasonally adjusted 0.8% in the fourth quarter compared with the previous three months, higher than the 0.7% median estimate in a Bloomberg survey.

The economy expanded 4.1% for the whole of 2018. compared with a revised 4% for the previous year. The NESDC expects growth of between 3.5% and 4.5% this year, driven by household spending, investment and tourism.

Private consumption and investment drove fourth-quarter growth as exports were hit by a slowdown in global demand, US-China trade tensions and a strong currency.

As exports wane, consumer spending and private investment are relative bright spots. Investor confidence and the wider Thai economic environment could be sensitive to the elections and policy steps after the poll, the NESDC’s Secretary General Thosaporn Sirisumphand said on Monday.

While local demand has remained resilient -- thanks in part to domestic stimulus packages launched by the ruling National Council for Peace Order ahead of the March 24 election -- the country is facing heightened political risks, which could hurt sentiment and domestic investment.

Foreign direct investment as a share of the economy has declined during a more than decade-long power struggle between exiled former leader Thaksin Shinawatra and the military and royalist elite. Thaksin or his allies have won every election since 2001, only to be unseated by the courts or the military.

 

The push to disband Thai Raksa Chart over its nomination of Princess Ubolrat for PM is reigniting political conflict's threat to the economy.

The push to disband the Thaksin-linked Thai Raksa Chart Party over a failed bid to make Princess Ubolrat its prime ministerial candidate lays bare deep splits ahead of the election, the first since a coup in 2014. The unfolding drama is a reminder of Thailand’s cycle of polls, unrest and military intervention since 2006.

'We don’t expect election-related chaos as we approach the election date,' said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. 'However, the ability to form a stable government is vital in the continuity of the recovery in private investments.'

While growth has recovered since 2014 -- when unrest brought the economy to a near standstill and sparked the coup -- the pace still lags neighbours in Southeast Asia.

Forecasters such as the World Bank expect rising private consumption and investment in Southeast Asia’s second-largest economy to fill much of the gap from easing exports this year. The risk is that domestic instability could lead companies and consumers to delay spending.

The Bank of Thailand, which kept its benchmark rate unchanged this month after the first hike in seven years in December, has said its “accommodative” monetary policy would remain appropriate in the period ahead. 

Price pressures have waned in the kingdom, partly because of a surge in the baht. Together with an uneven economic outlook, that’s adding to the case for leaving interest rates unchanged after December’s quarter-point increase.

'Baht outperformance and a pullback in global oil prices reinforce our expectations of a pause in policy rates this year,' said Radhika Rao, an economist at DBS Bank Ltd in Singapore.


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