Thailand cut its growth forecast for this year, as the country entered recession for the first time since the global financial crisis, with rising household debt limiting central bank scope to support the economy.
GDP unexpectedly shrank 0.3 percent in the three months through June from the previous quarter, when it contracted by a revised 1.7 percent, the National Economic and Social Development Board said yesterday. The economy rose a less-than-estimated 2.8 percent from a year earlier.
Thai policymakers are struggling to sustain growth as government spending plans are delayed, while a slowdown in China curbs demand for exports from Southeast Asian nations. Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said last month that household debt at 80 percent of GDP limits the scope for further easing.
“Exports have remained weak, while domestic demand is also weakening, and the infrastructure spending plan is also delayed,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp.
“The outlook for the economy is more severe now,” he said, adding that he expects the central bank will keep borrowing costs on hold this week.
The state agency cut its full-year forecast growth range to between 3.8 percent and 4.3 percent, from between 4.2 percent and 5.2 percent. It also lowered its export growth target to 5 percent from 7.6 percent.
The Thai central bank cut its this year’s GDP growth forecast to 4.2 percent from 5.1 percent on July 19, citing weakening exports. Shipments grew 0.95 percent in the first six months.
The monetary authority lowered borrowing costs by 25 basis points in May.
Private consumption grew 2.4 percent in the second quarter from a year earlier, slowing from a 4.4 percent pace in the previous period, the latest data showed. Government consumption rose 5.8 percent from 4.4 percent in the previous three months.
“We still have a chance to grow at the high end of the range if we can speed up budget disbursements and try to boost exports,” Arkhom Termpittayapaisith, the secretary-general of the state planning agency, told a news conference.
“Economic growth in the second half will rely more on private investment and tourism, as growth in exports and household spending are still limited. Still, those factors are sensitive to the political situation, making it a key risk for economic growth,” he said.
While the delayed public spending and last year’s high base following the slowdown after the 2011 floods are a challenge, lower inflationary pressure “allows monetary policy to be accommodative,” Arkhom said.
Consumer prices rose 2 percent last month from a year earlier, compared with 2.25 percent in June.