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31 Jan 2011

Thai Economy

December Indicators Pointing to Better-than-Expected 4Q10 GDP, Watching Inflation (Business Brief No.3035)

In December 2010, exports and industrial production maintained growth momentum over the previous month. However, several economic indicators, e.g., consumption and private investment, showed YoY decelerations due to a high base from the previous year. The Manufacturing Production Index (MPI) suffered a contraction for the first time in more than a year. As a result, KASIKORN RESEARCH CENTER (KResearch) views that the Thai economic slowdown continued during 4Q10, even though some indicators fared better than expected, which may put the figures for the 4Q10 GDP and the entire year higher than our preliminary projections of 3.0 percent and 7.6 percent, respectively.

KResearch maintains that the slowing Thai economy may continue into 1Q11. Close attention should be paid to certain variables, including the domestic political situation, accelerating inflation and the overall global economy. These factors may influence the pace of the Thai economy and an expected turnaround will likely begin in 2Q11. However, rising inflationary pressure may prove to be a major risk for both domestic and global economies. Runaway inflation, if it occurs, may affect the implementation of monetary polices by central banks worldwide (including the Bank of Thailand), and eventually hamper global economic growth.

Thai Economy