Thailand is on the comeback trail: Moody's
Thailand's economy is staging a strong comeback following last year's floods, as flood reconstruction and pent-up consumer demand will spur growth in 2012, said an analyst of Moody's Analytics. Moody's Analytics is a unit of Moody's Investors Servi
Based in Sydney, Matthew Circosta noted that Thailand’s post-flood recovery is on track after the economy shrank at its sharpest rate on record from October to December.
The fourth quarter’s 10.7 per cent quarter-on-quarter contraction left GDP growth at just 0.1 per cent for all of 2011.
"Based on January’s data, our tracker model is looking for 14 per cent GDP growth from January to March, reversing the fourth quarter’s decline. The outcome will probably be slightly lower, but expect a solid double-digit number nonetheless," he said.
As lost economic output is expected to be restored in the second quarter, post-flood reconstruction and pent-up consumer demand will drive a sharp rebound in GDP growth in 2012.
Moody's Analytics has revised the growth forecast for Thailand from 2.9 per cent to 5.5 per cent, thanks to the low growth base last year. Growth will hold around this rate through 2013 as reconstruction gains momentum and an improved global economy boosts exports.
Circosta wrote in his report that the Bank of Thailand’s 50 basis points' worth of interest rate cuts have helped to stabilise confidence and the central bank is expected to sit tight for now and assess the recovery before deciding whether a further monetary stimulus is needed.
Headline inflation has eased to 3.4 per cent, and core inflation is holding at around 2.8 per cent, which is slightly elevated. As growth and inflation pick up, expect the monetary bias to quickly shift from easing to tightening as the BOT looks to reverse recent rate cuts.
"We think rates will rise in the second half of 2012," he said.
