Thai flood victims passing Toyota cars at the flooded Toyota Bangkok branch in October. The historic flooding hammered Thailand’s exports, causing the economy to contract. (EPA Photo/Barbara Walton)
Posted at Jakarta Globe on February 20, 2012
Thailand’s economy shrank more than economists estimated as the worst floods in almost 70 years disrupted output by manufacturers from Western Digital to Honda Motor, pressuring policy makers to aid growth.
Gross domestic product declined 9 percent in the three months through December from a year earlier, after climbing a revised 3.7 percent the previous quarter, the National Economic and Social Development Board said in Bangkok today.
The median of 14 estimates in a Bloomberg News survey was for a 5 percent drop. The economy grew 0.1 percent in 2011.
Southeast Asia’s second-largest economy contracted for the first time since 2009 after floods that killed more than 700 people and inundated two-thirds of the country dented exports already hurt by weaker European demand. Prime Minister Yingluck Shinawatra has pledged to spend 350 billion baht ($11 billion) on infrastructure and the Bank of Thailand cut the benchmark interest rate for a second straight meeting in January.
“Risks to growth in the first half of this year could remain on the downside,” said Usara Wilaipich, a Bangkok-based economist at Standard Chartered and a former country economist at the World Bank.
“We expect to see recovery in 2012 driven by domestic demand, while recovery in manufacturing and exports will take some time. There is still some room for the BOT to cut rates.”
The baht gained 0.1 percent to 30.76 against the dollar at 11:20 a.m. in Bangkok after reaching a three-month high of 30.64 earlier, according to data compiled by Bloomberg. The benchmark SET Index of stocks rose 0.4 percent.
Thailand’s GDP fell 10.7 percent last quarter, compared with a revised 0.8 percent rise in the previous period.
“The economy this year will rebound strongly,” boosted by private and government spending, said the secretary general of the economic board, Arkhom Termpittayapaisith.
First-quarter GDP growth will be “slightly positive,” and the pace will “gain more momentum” from the second quarter onward, he said, adding that 7 percent growth this year is “possible.”
The board forecasts growth of 5.5 to 6.5 percent this year, compared with a previous estimate of 4.5 to 5.5 percent. The economy’s expansion in 2011 was less than an earlier government estimate of a 1.5 percent gain.
The central bank said risks posed by the worsening global outlook and the impact of the floods were greater than the threat of inflation. Weakening demand for the region’s goods has prompted policy makers from Indonesia to the Philippines to cut costs and support growth.