Thailand: Economic growth tilts up in Q4 but politics loom

  • The country’s economy grew at a faster pace in 4Q18 than 3Q18, as local demand helped to offset a slide in exports, but Thailand’s ongoing political divide is again threatening the economy.
  • GDP rose 3.7% y/y in 4Q18, up from a revised 3.2% y/y in 3Q18, the National Economic and Social Development Council (NESDC) said on 18 Feb 19. The median estimate of 23 economists in a Bloomberg survey was for expansion of 3.6%.
  • The economy expanded 4.1% for the whole of 2018 compared with a revised 4% in 2017. The NESDC expects growth of between 3.5% and 4.5% in 2019, driven by household spending, investment and tourism.
  • Private consumption and investment drove 4Q18 growth as exports were hit by a slowdown in global demand, US-China trade tensions and a strong THB.
  • While local demand has remained resilient – thanks in part to domestic stimulus packages launched by the ruling National Council for Peace Order (NCPO) ahead of the 24 Mar 19 election – the country is facing heightened political risks, which could hurt sentiment and domestic investment. Foreign direct investment (FDI) as a share of the economy has declined during a more than a 10-year long power struggle between exiled former leader Thaksin Shinawatra and the military and royalist elite.
  • In addition, the unfolding drama, the latest being the push to disband the Thaksin-linked Thai Raksa Chart Party over a failed bid to make Princess Ubolratana its prime ministerial candidate, is a reminder of Thailand’s cycle of polls, unrest and military intervention since 2006.
  • Forecasters such as the World Bank expect rising private consumption and investment in Southeast Asia’s second-largest economy to fill much of the gap from easing exports in 2019. The risk is that domestic instability could lead companies and consumers to delay spending.

External Link: