Q2 growth beats forecasts, but outlook cut as Covid surges

Q2 growth beats forecasts, but outlook cut as Covid surges

Food riders wait for orders at Siam Paragon in Bangkok, where, like other shopping malls, the only areas open are supermarkets and the food section for takeaway. (Photo: Arnun Chonmhatrakool)
Food riders wait for orders at Siam Paragon in Bangkok, where, like other shopping malls, the only areas open are supermarkets and the food section for takeaway. (Photo: Arnun Chonmhatrakool)

The economy unexpectedly grew in the second quarter from the first, helped by exports and government spending, even though fresh coronavirus outbreaks battered consumption and tourism.

The government again cut its 2021 economic growth forecast to 0.7-1.2% from 1.5-2.5% as the outbreak and lockdown measures crimped domestic activity amid the country’s slow vaccination rollout. The economy slumped 6.1% last year.

The biggest Covid-19 outbreak so far has seen a spike in cases and deaths, prompting tougher containment measures in Bangkok and nearby provinces in July before being extended this month, with lockdown areas expanded to 29 provinces - accounting for around 80% of gross domestic product (GDP).

The economy expanded a seasonally adjusted 0.4% in the second quarter from the previous quarter, data from the National Economic and Social Development Council (NESDC) showed, versus a forecast 1.4% drop in a Reuters poll.

From a year earlier, GDP grew 7.5% in the June quarter, beating the 6.4% rise forecast by economists, due largely to a GDP slump last year when the pandemic first hit.

The agency cut its GDP outlook for the full year to 0.7-1.2% from a previous forecast of 1.5%-2.5% growth.

However, increased exports, a rare bright spot in the economy, and fiscal measures have lent some support.

The NESDC now expects exports to grow 16.3% this year versus a 10.3% rise projected earlier.

But the agency predicts only 0.15 million foreign tourists this year, down from a previous forecast of 0.5 million. That compared with nearly 40 million foreign visitors in 2019.

Last week, Bank of Thailand Governor Sethaput Suthiwartnarueput told Reuters that while a contraction was "unlikely" in 2021, it was possible if the lockdown got extended further. The central bank expects 0.7% GDP growth this year.

The latest outbreak, which began in April, has accounted for most of the country’s total cases and deaths at a time when it was preparing to reopen more broadly to foreign visitors.

Coronavirus cases could double to 45,000 per day by early next month, even with the current lockdown measures in place, the Centre for Covid-19 Situation Administration said last week.

The government approved a further 500 billion baht borrowing this year for relief measures.

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