Technically in recession after two straight quarters of economic contraction
BANGKOK: Thailand's economy slipped into a technical recession in the third quarter on Monday, Nov 22, reinforcing signs of an Asia-wide slowdown as export growth cools, manufacturing ebbs and the impact of massive government stimulus spending fades.
Southeast Asia's second-biggest economy shrank 0.2 percent in the third quarter after a revised 0.6 percent contraction in the second, data showed on Monday, reducing chances of another interest rate rise next month.
The data reinforce signs of a slowdown across much of the region, from North Asian export powerhouses China, South Korea and Taiwan to Southeast Asian "tigers" Thailand, Singapore and Indonesia. Strong growth in Asia has been one of the few bright spots for the struggling global economy.
Figures last week showed Taiwan's economic growth slowing in the third quarter, while Singapore's trade-reliant economy shrank 18.7 percent and Indonesia reported this month its first slowdown in annual growth in five quarters.
From a year earlier, Thailand grew 6.7 percent in the quarter, largely in line with economists' forecasts and slowing from growth of 9.2 percent in the second quarter, the data from the state planning agency showed.
"Looking forward, we expect weaker global demand to bring Thailand's economic growth to below trend in the fourth quarter of 2010, and in the first half of 2011," said Usara Wilaipich, a Bangkok-based economist at Standard Chartered Bank.
Malaysia's economic growth slowed more than expected to 5.3 percent in the third quarter from 8.9 percent in the second, its central bank said on Monday, noting growth in the second half of the year and in early next year was moderating." [ID:nKLA002364]
OCBC economist Gundy Cahyadi said growth almost stalled in the third quarter from the previous three months, though few analysts give quarter-on-quarter figures.
The Asian slowdown has been exacerbated by the U.S. dollar's slide, which has driven up regional currencies and started to erode export revenue. It is complicating efforts by Asia's central banks to return interest rates to normal levels after drastic cuts in the wake of the 2008 global financial crisis.
The Bank of Thailand is likely to keep its trend-setting one-day repurchase rate unchanged at 1.75 percent at its next policy-setting meeting on Dec. 1, said Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board, Thailand's state economic planning agency.
Private economists echoed that view after the data, which was marginally better than a deeper 0.4 percent contraction expected by most economists in a Reuters survey.
"We expect less aggressive monetary policy by the Bank of Thailand and possible delays on interest rate hikes next year," said Isara Ordeedolchest, an economist at KT Zeamico Securities, a stock brokerage in Bangkok.
Pimonwan Mahujchariyawong, economist at Kasikorn Research Centre, expects the economy to contract again in the fourth quarter, hurt by a nearly 12 percent rise in the baht this year against the dollar to a 13-year high and floods that have killed more than 200 people since October.
RATES SEEN ON HOLD
Thailand's debt market has largely priced in a rate pause next month, with one-year swap rates down by 22 basis points in the past two weeks. Government bond yields were barely changed after Monday's economic data.
Indonesia's central bank is also seen pausing to keep its policy rate on hold at a record low 6.5 percent well into 2011 as it tries to avoid encouraging an even bigger flow of investment capital to its markets.
Despite the slowdown, Thailand's state planning agency raised its forecast for economic growth this year to 7.9 percent from 7.0-7.5 percent projected in August, and tipped growth of between 3.5 percent and 4.5 percent in 2011.
Agency chief Arkhom said the quarterly contraction was due to lower state spending and a slowdown in private investment.
"It's cyclical that Q3 is usually weaker than other quarters," he told reporters, adding that the flooding across much of Thailand over October and November shaved economic growth by 0.3 percentage points.
He said the fourth-quarter performance depended on strength in exports which his agency expected to rise 25.1 percent this year before slowing to about half that rate of growth next year.
The data puts Thailand technically in recession after two straight quarters of economic contraction.
Earlier data had indicated the economy grew 0.2 percent in the second quarter from the first, but that was revised down to show it had contracted, due largely to political unrest over April and May in which more than 90 people were killed.
(Source: Reuters)
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