Thailand’s economy contracted 2.2 percent in the three months to March from the previous quarter — the first decline in more than a year — as manufacturing output fell, official data showed yesterday.
The fall followed a blistering yearlong recovery from devastating floods in late 2011 that hit major factories north of the capital Bangkok and caused a double-digit drop in GDP.
On a year-on-year basis, GDP expanded by 5.3 percent in the first quarter of the year, the government’s National Economic and Social Development Board reported.
That marked a sharp slowdown from the fourth quarter last year, when growth hit a record high of 19.1 percent, according to an updated estimate.
“The main drivers were domestic consumption and tourism,” board secretary-general Arkhom Termpittayapaisith said of the most recent quarter.
Growth in those sectors helped to offset a 5.9 percent quarter-on-quarter slump in manufacturing, which had expanded rapidly last year, helped by a government scheme to encourage people to buy new cars.
“The expiry of a subsidy scheme for first-time car purchases appears to have hurt car sales in January and February,” said Daniel Martin, Asia economist at the Capital Economics consultancy firm.
“However, the effect has been short-lived — sales were back to a record high in March. Consumer confidence remains buoyant, while hikes in minimum wages at the start of this year should support spending,” he added
The board reduced its forecasts for this year’s economic growth to 4.2 percent to 5.2 percent, from a previous projection of 4.5 percent to 5.5 percent, because of the weaker-than-expected first-quarter performance.
Arkhom said growth would be affected by a weaker-than-anticipated economic recovery in the US, Europe and Asia.
The Thai government has urged the central bank to reduce its key interest rate — now at 2.75 percent — to rein in a rising baht, which is bad news for exporters.
The Bank of Thailand last cut rates in October last year to help manufacturers.
Martin said the bank was “unlikely to risk undermining its credibility” by taking action when it meets next week, predicting that the policy rate would be left at its current level for the rest of the year.