Negative signs seen in Thai exports and manufacturing during June, along with weaker than expected economic figures from China and the Eurozone, gave rise to heightened concern toward prospects for the Thai economy. However, our 2Q12 GDP – as published by the NESDB – fared well, growing 4.2 percent YoY, bettering the 0.4 percent YoY growth recorded in 1Q12, buoyed by rebounding industrial production and higher domestic spending of both private and public sectors, especially those projects that benefited from government's stimulus measures and post-flood recovery programs.
Looking into 2H12, we at KResearch are maintaining our growth forecast for the Thai economy at 7.0-9.0 percent YoY, which would be considerably higher than the 2.2 percent YoY pace reported in 1H12. However, because of a low base from 2011 due to the catastrophic flooding then, our assessment for Thai economic performance in 2H12 will have to take into account whether we can maintain growth momentum through each quarter or not.
Despite continuing support from state spending, we expect that the growth momentum experienced in Thai exports during 2H12 may be tested later on by external risks, e.g., the ongoing Eurocrisis, slowing Chinese economy and volatile oil prices. Meanwhile, private consumption in Thailand (except for certain items that benefit from government measures) may decline after the brief rebound during post-flood recovery programs, converse to production costs and inflation that are set to rise.
Given this, we at KResearch are keeping our forecast for the Thai economy in 2012 unchanged at 5.0 percent, or within a range of 4.5-5.5 percent.
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