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Thai economic growth decelerates sharply in Q4 2019
Thai GDP growth decelerated sharply in the fourth quarter to only 1.6 percent year-on-year from third quarter’s 2.6 percent. This was the weakest since third quarter of 2014. For the whole of 2019, Thai economy grew 2.4 percent, the softest in five years, and down from a revised 4.2 percent in 2018. The third quarter growth was upwardly revised to 2.6 percent year-on-year from 2.4 percent.
The breakdown indicated a widespread deceleration in domestic demand, with government consumption shrinking in year-on-year terms in the midst of the budget delay. A slower pace of inventory build-up also weighed on the headline growth. Exports shrank, but not as much as imports, leaving net exports to be a positive contributor to growth.
“Looking ahead, a turnaround will be difficult, given headwinds stemming from the COVID-19 outbreak and inclement weather conditions”, said ANZ in a research report.
The tourism sector is expected to record considerable losses. Daily international passenger arrivals in Suvarnabhumi airport have dropped 43 percent year-on-year, while the tourism minister estimated that arrivals would fall by 50 percent year-on-year in the first half of 2020. However, it would be difficult to fully compensate for the tourism losses even if the outbreak could be contained in the next couple of months.
The economic effect from the virus outbreak is also expected to extend to the goods export sector, given the close economic ties between China and Thailand. However, it is plausible to see some catch-up on the front later in 2020 as economic activity in China normalizes after the virus outbreak is contained. With capacity utilization at only 64 percent, Thai factories have scope to expand production to meet pent-up demand.
“The challenging growth backdrop adds context to the Bank of Thailand’s (BoT) pre-emptive move to cut its policy rate to a new record low of 1.0 percent earlier this month. With conventional policy space diminishing, the bar for a further rate cut will be high. Nonetheless, the pressure on the BoT to act again will rise if the economic outlook continues to deteriorate”, added ANZ.