Thailand’s GDP growth surpasses expectations in Q2

The Thai economic growth surpassed expectations in the second quarter on government spending. Thai economy expanded 3.5 percent year-on-year in the second quarter of 2016, accelerating from first quarter’s 3.2 percent growth. On a quarter-on-quarter basis, the Thai economy decelerated slightly to 0.8 percent seasonally adjusted from first quarter’s upwardly revised print of 1 percent growth.

The National Economic and Social Development Board has kept its 2016 economic growth outlook unchanged at 3 percent-3.5 percent year-on-year, whereas export growth projection is lowered to -1.9 percent year-on-year from -1.7 percent.

Government spending in the country has been speeded up. Budget disbursements are tracking above the levels seen in 2015. Moreover, public transportation projects are expected to quicken after the Thai government fast-tracked projects of THB 582 billion, around 4.5 percent of GDP, said ANZ in a research report.

“Should the pace of government expenditure outlay accelerate, we expect the incremental support to growth to increase for the remainder of 2016 and into next year”, added ANZ.

The recent bomb explosions in the nation are expected to slightly impact the tourism sector adversely. Even if tourism contributes about 20 percent to GDP, the economic effect of the recent bombings is expected to be restricted. Also, infrastructure investment is expected to continue to be a major support through the second half of 2016 and also in the next year.

Meanwhile, the Bank of Thailand is expected to keep its policy on hold through this year, according to ANZ. In the second quarter, major commercial banks have lowered their lending rates even without the central bank reducing its policy rate. Government spending has given the support. Lastly, the Bank of Thailand is less tilted to lower rates in response to a stronger Thai baht, noted ANZ.