Thai economic growth accelerated in Q1 on strong tourism and fiscal spending

Thailand’s economic growth for the first quarter came in on the upside on strong tourism and fiscal spending. The country’s GDP grew 3.2% y/y in Q1, above consensus forecasts and above 2.8% growth recorded in Q4 2015. The economic growth was mainly driven by goods and services’ exports that climbed 5.1% in the first quarter, majorly because of a sharp increase in tourism receipts. Final consumption of general government grew 8% y/y in the first quarter, as compared with Q4 2015’s 4.8% growth.

On a quarterly basis, the economic growth accelerated to 0.9% q/q sa from Q4 2015’s 0.8% growth. According to the country’s National Economic and Social Development Board, the Thai economy is forecast to expand in the range of between 3%-3.5% y/y this year, with export growth likely to drop to -1.7% from 1.2%.

Monetary policy risks seem to have tilted towards a reduction of rate, said ANZ in a research report. If the balance of payment continues to be in surplus along with a renewed pressure of appreciation of the nominal effective exchange rate (NEER), the Bank of Thailand might lower policy rates and thus reduce the interest rate differentials and encourage outflows of capital to ease the THB NEER. There are still rising risks of a deceleration of growth after the fiscal stimulus wanes, particularly with the fiscal multiplier appearing lower, added ANZ.