Bloomberg News

Thai Growth Beating Estimates Signals Asian Resilience: Economy

February 17, 2013

Thai Growth Quickens on Local Demand, Reducing Rate-Cut Pressure

A woman carrying a parasol walks outside the Siam Center shopping mall in Bangkok. “Consumption and investment should continue to grow this year,” Benjarong Suwankiri, an economist at TMB Bank Pcl in Bangkok, said before the data release. Photographer: Brent Lewin/Bloomberg

Thailand’s fourth-quarter growth accelerated more than economists estimated, joining Asian nations from Indonesia to the Philippines in showing resilience to the faltering global economy as local demand rises.

Gross domestic product increased 18.9 percent in the three months through December from a year earlier, after expanding a revised 3.1 percent in the previous quarter, the National Economic and Social Development Board said in Bangkok today. That beat the median estimate of 15.3 percent in a Bloomberg News survey and is the fastest since Thailand began compiling data in 1993. The economy grew 6.4 percent in 2012 from 0.1 percent in 2011, when floods swamped most of the country.

Asian leaders from Thai Prime Minister Yingluck Shinawatra to Malaysia’s Najib Razak and Philippine President Benigno Aquino have boosted government spending to support growth as Europe’s sovereign-debt crisis hurt exports. Recoveries in China and the U.S. have improved the outlook for the region, with economies including Taiwan, Singapore and Malaysia estimated to report faster GDP growth for the fourth quarter later this week.

“We have stronger consumer power, we have minimum-wage hikes across the Southeast Asian region which is supportive of consumer demand and investment is picking up,” said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc. “The positive growth momentum is likely to continue in 2013 and if exports recovery comes much sooner, the outlook is brighter in this region.”

Thai growth surged last quarter after a slump in the corresponding period in 2011 when the worst floods in almost 70 years disrupted output by manufacturers from Western Digital Corp. to Honda Motor Co. The economy is predicted to expand 4.5 percent to 5.5 percent this year, the agency said today, keeping its earlier forecast. Export growth may be 11 percent, it said.

Political Pressure

The Bank of Thailand last month raised its 2013 GDP forecast to 4.9 percent from an earlier prediction of 4.6 percent, while maintaining its projection for export growth at 9 percent. Overseas sales increased for a fourth month in December, and the manufacturing index climbed for a third straight month.

Thai car sales by all producers reached a record 1.44 million in 2012, Toyota Motor (Thailand) said last month, helped by a tax incentive for first-time buyers. Bank loans grew 13.7 percent last year as companies rebuilt businesses that were devastated by floods at the end of 2011, with Bangkok Bank Pcl, the biggest lender, reporting full-year profit rose 21 percent.

The monetary authority last month held borrowing costs for a second meeting and Governor Prasarn Trairatvorakul said he was under no pressure even after Finance Minister Kittiratt Na- Ranong renewed calls for easing to cool the baht’s gains.

Sufficiently Robust

Asian stocks rose toward an 18-month high, with the MSCI Asia Pacific Index adding 0.5 percent as of 11:54 a.m. in Tokyo. The yen fell after Group of 20 nations refrained from censuring the nation’s currency policy, while the Thai baht was little changed at 29.87 per dollar as of 11:15 a.m. in Bangkok. It is the biggest gainer in the past six months among 11 widely-traded Asian currencies tracked by Bloomberg.

Malaysia’s growth probably accelerated to 5.5 percent last quarter from a year earlier, after expanding 5.2 percent the previous three months, according to the median estimate in a Bloomberg survey ahead of a Feb. 20 report. Taiwan and Singapore will release final fourth-quarter data two days later, and both are forecast by economists to report growth that is in line with initial estimates.

“We’re not looking for any more interest-rate cuts from Thailand,” Malaysia, Indonesia or the Philippines, said Robert Prior-Wandesforde, a Singapore-based economist at Credit Suisse Group AG. “Growth is sufficiently robust now to mean that the chances of policy-rate reductions are pretty low, and indeed the chances of interest-rate hikes in some of these countries before the end of the year are higher.”

Asset Bubbles

Keeping rates low for a long time may lead to asset bubbles, Prasarn has said. Kittiratt, who has repeatedly called for lower borrowing costs, said this month he wrote a letter to central bank Chairman Virabongsa Ramangkura, reiterating his view that the rate is luring capital inflows. Prasarn last week said the rate differential is not the primary reason for rising inflows.

Thailand needs to reduce money supply, which is the main cause of asset bubbles, and not just low interest rates, Kittiratt said today after the data release. The central bank plans to remove limits on overseas investments by small and medium enterprises, and allow exporters to keep deposits in U.S. dollars to help ease pressure on the baht, he said.

The Philippine central bank has said it is considering more measures to counter the impact of capital inflows on the peso, which has recently strengthened to a record.

The Thai monetary authority will leave its one-day bond repurchase rate unchanged when policy makers meet on Feb. 20, according to 16 of 18 economists in a Bloomberg survey. Two expect a 25 basis-point reduction.

Singapore Exports

Thailand’s economy grew a seasonally adjusted 3.6 percent last quarter from the three months through September, when it expanded a revised 1.5 percent, the agency said today.

Elsewhere in Asia, Singapore’s exports rose less than economists estimated in January. Non-oil domestic exports gained 0.5 percent from a year earlier, a report showed today, compared with the 3 percent median estimate in a Bloomberg News survey.

In South Korea, producer prices fell by the most in more than three years, tumbling 1.6 percent in January from a year earlier, a report showed today. In Europe, Spain is scheduled to report bad loans data for December, while the European Central Bank will release current-account data for the same month. U.S. financial markets are closed for Presidents’ Day.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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