Thailand’s economic growth slows but beats estimate

BANGKOK – Thailand’s economy grew better than expected in the first quarter, fuelled by tourism and private consumption, easing the pressure on the central bank to respond to the government’s call for lower borrowing costs.

Gross domestic product (GDP) in the three months to March increased 1.5 per cent from a year earlier, the National Economic and Social Development Council said on May 20.

While this was slower than the 1.7 per cent pace in the fourth quarter, it was well above the 0.8 per cent median estimate in a Bloomberg survey. Only one analyst correctly predicted the print, while the rest expected the slowest expansion since the end of the pandemic.

Quarter on quarter, the economy expanded 1.1 per cent compared with a median estimate for 0.6 per cent growth. GDP contracted a revised 0.4 per cent in the October-to-December period.

The baht was up 0.1 per cent against the US dollar after the data, poised to extend a four-day rally.

Private consumption jumped 6.9 per cent year on year in the first quarter, offsetting a 2.1 per cent decline in government spending, according to the data release.

The better-than-forecast GDP data may ease pressure on the Bank of Thailand (BOT) to cut borrowing costs that are at a decade high.

The data comes as tensions between the government and the central bank appear to have cooled after Finance Minister Pichai Chunhavajira last week said the government would leave the monetary decision-making to the BOT, explaining that access to lending and liquidity was more important than the level of borrowing costs.

The central bank’s policy rate has stood at a decade-high 2.5 per cent since September, even as consumer prices slipped into negative territory in the fourth quarter of 2023 and GDP growth stuttered.

Headline inflation finally quickened in April, showing the first gain in the past seven months. The BOT said in April that holding the rate steady had given it “policy optionality” to deal with currency volatility, geopolitical risks and uncertainty around the US Federal Reserve’s pivot to easing.

South-east Asia’s second-largest economy is expected to pick up pace in the second half of 2024, supported by public spending after the much-delayed passing of the national budget.

The government is targeting to roll out the US$14 billion (S$18.8 billion) cash handout later in 2024 to boost consumption. Critics have warned that this could fan inflation and set back fiscal consolidation. BLOOMBERG