HSBC maintains Thailand's growth forecast
HSBC Global Research maintains its growth forecast for Thailand at 5.5 per cent, which is in line with the newly-revised figure of the National Economic and Social Development Board.
"Echoing trends seen in other ASEAN economies like Indonesia and Malaysia, domestic demand continued to a significant growth driver for Thailand in 2Q, helping to offset the drag from net exports. Private and government expenditure, along with outlays on plant and equipment, added 5.7 per cent-pts to the overall on year GDP growth headline. By contrast, net exports subtracted 4.4 per cent-pts from growth, as the trade surplus shrank compared to a year ago. Inventories added a relatively chunky 2.8 per cent-points, not much different from that seen in 1Q and reflecting a (natural) accumulation of stock amid the slower global economic backdrop," the economic house said in a research note.
The note was released today after the NESDB released the second-quarter data.
To HSBC, the quarterly out-turn compares to a slightly upwardly revised expansion of 0.4 per cent on year in 1Q (from 0.3 per cent originally), which reflects significant base-year effects as the economy recovered from the floods late last year. In sequential terms 1Q growth was actually sharply higher, at 10.8 per cent on quarter.
Growth across all three components of domestic demand accelerated in on year terms. Private consumption expenditure nearly doubled to 5.3 per cent, as government economic stimulus helped to increase households' purchasing power and consumer confidence. Recall too, that minimum wages were lifted by nearly 40 per cent across the country in April. According to the National Economic and Social Development Board (NESDB), durable goods purchases surged 20.9 per cent on year, driven by strong pent-up demand for vehicles. Purchases of semi-durables and services were also robust. Meanwhile investment spending climbed by over 4 per cent-pts to 24.2 per cent on year, as both private and public outlays increased on theback of post-flood reconstruction works.
In sequential terms there was some deceleration in the domestic demand components, though this was to be expected given the extremely strong rates of growth in 1Q as the economy bounced back sharply from the flood-affected contraction in late 2011. In our assessment the sequential rates of expansion seen in the domestic demand components were still robust -
private consumption expenditure was up 1.2 per cent on quarter sa (or nearly 5 per cent annualized), while investment rose 4.9 per cent on quarter sa. (This compares to increments of 6.8 per cent and 14 per cent on quarter sa respectively).
The strong domestic demand numbers on the expenditure side were echoed in the sectoral GDP breakdown. In line with the investment numbers, construction surged 6.9 per cent on year (0.8 per cent in 1Q). According to the NESDB, higher consumer purchasing power resulted in increased residential and commercial construction activity. Post-flood rebuilding also led to construction in the Eastern industrial estates, and in the government context, repairs of roads, bridges and dams.
Wholesale and retail trade picked up to 5.4 per cent on year (1Q 4.1 per cent), driven by an increase in trade services amid higher demand for industrial and imported goods. Repairs of motor vehicles and household items also rose. Meanwhile manufacturing output rose 2.7 per cent on year, against a 4.3 per cent decline in 1Q. But this acceleration was perhaps more
'technical' in nature, as factories resumed their production and strove to meet the backlog of orders post-floods. The sector remains under the shadow of broader global trends such as the slowing IT cycle, with the NESDB noting that the production of hard disk drives and textiles decreased on lower external demand.
For the first half, today's out-turn brings growth to 2.2 per cent on year. Growth in the second half should be much higher, particularly in 4Q, owing to the low base-year effect brought about by last year's floods.
