The Thai economic recovery was underway in April 2012, led by better manufacturing output that reported growth of 1.5 percent MoM, thanks to additional boosts from gradually improving electronics output. Although private investment was threatened by higher costs, post-flood investments may help support growth in key economic indicators, thus resulting in the Private Investment Index (PII) growth of 2.6 percent MoM.
Although overall private consumption continued to expand, some elements reflect pressure from significant increases in the cost of living, which dampened private consumption to contract (-)1.2 percent MoM. Despite a lesser contraction of (-)3.5 percent YoY, our export growth may not be seen in the near-term due largely to economic risks globally.
Regarding the Thai economic outlook, global economic risks may lead to our slow export recovery. Nevertheless, KResearch estimates that a falling cost of living, plus measures to spur income and rising demand for durable goods, should all support domestic spending growth in 2Q12, particularly in private consumption that should reach a level of 2.7 percent YoY. Then, this should help boost our economic recovery path in 2Q12, with GDP growth of around 3.1-4.1 percent YoY expected.
In 2H12, KResearch expects that economic growth should improve over 1H12, due to low base from 2H11, plus better spending at home boosted by government stimuli, especially in private sector spending and exports. Meanwhile, government measures may help offset previously unsatisfactory private sector spending and exports caused by uncertainties in production costs, the domestic political situation and prolonged deceleration in major economies amid economic risks in Europe and Middle East.
KResearch views that, although domestic spending should be the main boost for Thai economic performance overall, exports may be dampened by global economic direction that is now shaken by Eurozone debt crisis. Despite our relatively low exports to the Eurozone over the past five years, our exports may be indirectly affected by lower economic growth in other regions worldwide.
Thus, Chinese economic growth should be monitored. If Eurozone risks do not ebb, a Chinese recovery in 3Q12 may be delayed, thus hurting some of our industries, with high reliance on the Chinese market, e.g., computers, parts and accessories, rubber and related products, plastic pellets and products thereof, chemicals and cassava products etc.