Thailand’s economy suffered a double-digit contraction in the fourth quarter of last year, the sharpest on record, it said yesterday after the kingdom’s worst floods in half a century pummeled industry.
GDP shrank 10.7 percent in October-December from the previous quarter, according to the National Economic and Social Development Board. GDP fell 9 percent compared with the same period in 2010.
It was the sharpest drop in a single quarter since comparable records began in 1993, according to Apichai Thamsermsukh, an official at the government agency.
The 1997-1998 Asian financial crisis saw smaller quarterly declines, but over a longer time period, he said.
“This is an unusual drop caused by the manufacturing sector,” Apichai added.
The months-long floods last year killed hundreds of people and took a heavy toll on Thailand’s industrial heartland north of Bangkok, with many factories forced to close temporarily.
For the whole of last year, Thailand’s economy expanded by 0.1 percent, after an increase of 7.8 percent in 2010, the figures showed, missing analyst forecasts.
However, the government and analysts are optimistic about prospects for a rebound, with Thai Minister of Finance Kittiratt Na-Ranong predicting last week that the export-dependent economy could grow by 7 percent this year.
“Last year’s floods severely affected the Thai economy, but the contraction is only temporary,” Standard Chartered economist Usara Wilaipich said. “There will be an economic recovery this year, driven by domestic demand and manufacturing, which are rebounding.”
However, she said the revival would be slow in the first half of this year because industrial production and exports would take time to recover to normal levels, while the global economic outlook remains uncertain.
“Semiconductor makers in particular need to import and install new machines replace those damaged by the flood. I think their operations will be back on track in the third quarter,” Usara added.
At their height last year’s floods affected 65 of the country’s 77 provinces, deluged hundreds of thousands of homes and forced the closure of large industrial parks, disrupting global supply chains.
After the cleanup operation began toward the end of the year, many of the worst-hit companies said it would be several months at least before their operations returned to normal.
Japanese auto giant Honda has idled operations since early October last year at its factory in Ayutthaya, where it was forced to destroy more than 1,000 cars that were submerged by the muddy waters.
Thailand’s central bank last month cut its benchmark interest rate for the second time in three months, by 0.25 percentage points to 3 percent, in a bid to stimulate the weakened economy.
Experts see scope for another rate cut, particularly as inflation slowed sharply in December to an annual rate of about 3.5 percent.