Thailand’s economy expanded at a slower pace than forecast, making a case for the central bank to pause its monetary tightening to support growth in the face of an exports downturn and a political impasse.
(Bloomberg) — Thailand’s economy expanded at a slower pace than forecast, making a case for the central bank to pause its monetary tightening to support growth in the face of an exports downturn and a political impasse.
Gross domestic product in the three months through June rose 1.8% from a year earlier, the National Economic and Social Development Council said Monday. That compares with the 3% median estimate in a Bloomberg survey and a revised 2.6% print in the first quarter.
The economy expanded 0.2% quarter-on-quarter, against a median estimate for 1.2% growth.
While the baht extended gains against the dollar, rising as much as 0.4%, the key stock index swung between gains and losses. The yield on benchmark 10-year government bonds rose for a sixth straight day to 2.718%, the highest since Nov. 30.
The slower print may prompt the Bank of Thailand to halt its monetary policy tightening to preserve the tourism-induced momentum in the economy. That will be key to supporting growth, given revised expectations for tourism revenues to be lower and a slump in exports. A delay in government formation since the May general election is also clouding the outlook.
The political developments are affecting economic sentiment, Danucha Pichayanan, secretary-general of NESDC, said Monday. The council lowered its full-year growth forecast to 2.5% to 3% this year from 2.7%-3.7% seen previously.
The delay in forming a new government risks stalling policymaking, including finalizing the spending plan for the new fiscal year starting Oct. 1.
“It looks increasingly likely that the BOT is done with hiking policy rates this year,” said Burin Adulwattana, chief economist at Bangkok-based Kasikorn Research Center. “Thailand’s economic outlook has darkened with risks from all sides including local political uncertainty as well as severe droughts, elevated household debt and property sector in China.”
While the country has little control over external developments and weather phenomenon, lawmakers can put an end to the political stalemate when they convene Tuesday to elect a prime minister.
While the general election-winner, Move Forward Party’s Pita Limjaroenrat, was previously blocked from becoming prime minister, the second-placed Pheu Thai party is set to nominate tycoon Srettha Thavisin for premiership.
–With assistance from Tomoko Sato, Anuchit Nguyen, Patpicha Tanakasempipat and Janine Phakdeetham.
(Updates with details throughout.)
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