Strongest GDP in 3 years brightens 2016 outlook
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THE ECONOMY expanded 3.2 per cent in the first quarter of this year, the quickest pace in three years, thanks to strong public spending and the deluge of international tourists.
Public spending led the recovery, as public consumption rose 8.0 per cent year-on-year and public investment jumped 12.4 per cent. On the external front, the influx of tourists drove exports of services up 18.8 per cent, while exports of goods recovered to 1.0-per-cent growth, ending a four-quarter streak of contraction.
Domestic demand, however, remained subdued, with private consumption picking up 2.3 per cent and investment 2.1 per cent.
By sector, agriculture remained in recession for the sixth quarter, contracting 1.5 per cent.
Manufacturing reverted back to contraction of 0.3 per cent on the back of the slowdown in car manufacturing after the front-loaded demand ahead of the excise tax increase at the turn of the year.
On the other hand, services (15.8 per cent) remained a bright spot, led by tourist-driven hotels and restaurants.
Construction (11.2 per cent) benefited from aggressive public investment projects, while wholesale and retail (5.1 per cent) maintained strong momentum.
With public spending, tourist arrivals and merchandise exports exceeding our expectation, we see an upside risk to our 2016 GDP growth forecast of 2.7 per cent.
And on the back of the brighter growth outlook, we also expect the Bank of Thailand to leave its policy rate at 1.50 per cent throughout the year.
