Thailand's second-quarter GDP growth expanded 0.9% quarter-on-quarter, and at a better-than-expected 7.5% year-on-year, versus a consensus forecast of 6.4% and JPMorgan's estimate of 6.8%.
Nonetheless, as a country highly reliant on tourism and with the continued limits on cross-border travel, we expect a full recovery in Thailand back to pre-Covid-19 levels to only be achieved in the second half of 2022. Consequently, we expect policy settings will remain accommodative through the first half of 2022.
Some downside risk remains in the third quarter of 2021 as cases rise and mobility is limited.
With new Covid-19 cases resurgent, the risk is that the mobility measures imposed during the second and third quarters could act to further slow private consumption and the services sector.
At this point, we continue to maintain a forecast of zero quarter-on-quarter growth for the third quarter, taking the view that fiscal policy could provide some offset, though we acknowledge downside risk amid high case counts and limited improvement in mobility.
The macro narrative in Thailand continues to revolve around the impact of Covid-19 and its differentiated impact on the goods and services producing sectors. The goods producing sector rose 9.9% quarter-on-quarter, even as the non-goods producing sector contracted 1.5%, thus giving rise to the 0.9% quarter-on-quarter headline GDP expansion, reflected also in soft net exports of goods and services.
On the demand side, private consumption fell in the second quarter, though this was partially offset by fixed investment, especially in construction, and government spending.
In summary, a multi-speed recovery is expected to continue. For the second half of 2021, we expect that two intersecting macroeconomic developments in Thailand will continue: the ongoing recovery in goods production amid weakness in the services producing sectors. This trend will persist until cross-border travel normalises, which we anticipate could occur in the second half of 2022.
