BANGKOK: Thailand’s central bank signalled yesterday that Southeast Asia’s second-largest economy would avoid recession this quarter and said manufacturing and consumption “started to show signs of recovery” in May.
The Bank of Thailand (BOT) issued its rosy assessment while releasing a set of data that showed the economy, battered by months of political tensions, continued to generate weak data in May - during which the army took power.
The central bank, which earlier this month slashed its 2014 growth forecast nearly by half to 1.5 percent, said gross domestic product in April-June will be up more than 1 percent from the previous three months - meaning there won’t be a second consecutive quarterly contraction.
For January-March, Thailand reported a 2.1 percent contraction from the previous three months.
“Overall economic activities in May 2014 picked up slightly from the previous month,” the central bank said in a statement on Monday. “Manufacturing production and private-sector spending started to show signs of recovery.”
Don Nakornthab, a senior BOT official, said that in the current quarter, the economy is expected to shrink 0.4 percent from a year earlier, compared with the first quarter’s annual contraction of 0.6 percent.
Analysts believe the military’s intervention may have put a floor under the country’s deteriorating conditions and shored up consumer confidence by defusing the threat of an escalation in political violence, but mending its deep-rooted political and economic malaise will take time.
The army government has quickly disbursed overdue rice payments to farmers, but it is not clear if spending in rural areas has recovered as a result and if any post-coup rebound in spending would be enough to keep the economy from slipping into recession in the second quarter.
Likewise, the government has announced plans to fast-track stalled spending such as on major infrastructure projects, but even projects which get the green light soon are not expected to contribute greatly to growth until 2015.
Other key drivers of the economy also remain weak. Officials are counting on improvements in exports — which equal more than
60 percent of the economy —and tourist arrivals, but it may be months before numbers show gains.
A business sentiment index the BOT uses — while improved to 48.6 in May from 44.3 in April —remained below 50, and hence companies’ confidence remains fragile. Private credit rose 7.8 percent in May from a year earlier, slowing from 8.6 percent growth in April, Credit Suisse said in a research note earlier yesterday that it remained cautious on full-year growth prospects this year, predicting expansion of 1.1 percent compared with the BOT’s recently-lowered 1.5 percent forecast. Reuters
