Thailand’s economy grew at the slowest pace in almost two years last quarter as political unrest hurt local demand and tourism, increasing pressure on the central bank to cut interest rates and support expansion.
GDP rose 0.6 percent in the three months through December last year from a year earlier, Thailand’s National Economic & Social Development Board (NESDB) said yesterday.
The expansion was the smallest since the first quarter of 2012, based on previously reported data. The economy grew 2.9 percent last year from a revised 6.5 percent in 2012.
The anti-government protests will impact investment and tourism and disrupt the nation’s policymaking, the World Bank said last week.
The central bank unexpectedly held borrowing costs at its meeting last month, surprising economists who had predicted a cut.
The Thai state planning agency yesterday cut its GDP growth forecast to between 3 percent and 4 percent for this year from a range of 4 percent to 5 percent earlier.
“The data today confirmed the impact of the protests on the economy,” said Wee-Khoon Chong, head of rates strategy Asia, excluding Japan, at Nomura Holdings Inc in Singapore. “It is likely to worsen further this quarter, given ongoing uncertainty over the election.”
“The tone in the recent Bank of Thailand statement remained dovish and supports our view for 50-basis-point rate cuts over the next few meetings,” Chong said.
Demonstrations against Thai Prime Minister Yingluck Shinawatra that began on Oct. 31 last year have killed 11 people and injured more than 600 paralyzed parts of the capital and disrupted a national election on Feb. 2.
Fitch Ratings said this month that prolonged political confrontations could impair economic performance and undermine the nation’s credit strength.
Thai consumer confidence fell to the lowest in more than two years last month, after Yingluck declared a state of emergency in Bangkok to curb violence. Delayed payments to rice farmers have affected local consumption, Bank of Thailand Governor Prasarn Trairatvorakul said last month, while the Thai tourism council predicts visitor arrivals may slide by 7.3 percent in the first quarter from a year earlier.
The unrest may also hurt new investments as companies consider other options, and even existing investors like Toyota Motor Corp may be hesitant in their commitments, Kyoichi Tanada, president of Toyota’s Thai unit, said on Jan. 20.
The NESDB yesterday cut its Thai investment growth forecast for this year to 3.1 percent from 7.1 percent earlier, largely on lower public spending. It also cut its consumption growth prediction to 1.6 percent from 2.9 percent. Thai exports may rise 5 percent to 7 percent this year, it said.
The Thai economy expanded 0.6 percent in the fourth quarter of last year from the three months through September, the agency’s report showed.
Growth last quarter slowed from a 2.7 percent pace reported in the third quarter from a year earlier.
“With domestic demand struggling, the external sector’s performance will be key to Thailand’s overall growth outlook,” said Krystal Tan, a Singapore-based economist at Capital Economics Ltd. “With fiscal policy effectively paralyzed, the central bank must take the burden of responsibility for supporting the economy.”