Thailand: Economic growth moderates noticeably in the third quarter
The Thai economy expanded at a markedly slower pace in the third quarter compared to the previous quarter, due to weakness in the external sector. The economy grew 3.3% year-on-year in the July–September period, which is down from 4.6% in the second quarter and below market expectations of a stable growth pace. In quarter-on-quarter terms, growth in the economy flatlined following a revised 0.9% expansion in the second quarter (previously reported: +1.0% quarter-on-quarter).
On an annual basis, domestic demand remained firm in the third quarter. Private consumption growth hit 5.0% in the third quarter (Q2: +4.5% yoy), a near two-year high. Higher household expenditure reflected a pick-up in consumer confidence amid improvements to income levels and government policies to aid low-income households. Muted inflationary pressures and still-accommodative monetary policy further fueled private consumption growth. In addition, fixed investment growth picked up (Q3: +3.9% yoy: Q2: +3.7% yoy) on greater private investment expenditure while government consumption edged up slightly (Q3: +2.1 yoy; Q2: +2.0% yoy).
On the external front, merchandise export growth cooled significantly due to a high base effect, spillovers from the trade spat between the United Stated and China, and moderating growth among key trade partners. Goods and services exports therefore contracted 0.1% in the third quarter over the same period a year ago. At the same time, merchandise imports continued growing at a strong double-digit pace due to high Thai demand for raw materials and intermediate goods, while most other categories also recorded robust expansions. Goods and services imports, meanwhile, expanded 10.7%. As a consequence, the external sector markedly dragged on the headline reading.
Despite the third quarter’s deceleration, the economy should retain a solid growth momentum next year. Economic activity should benefit from resilient domestic demand with robust private consumption and an acceleration in fixed investment and government consumption growth. Meanwhile, the tourism sector will likely bounce back following July’s deadly boat accident which has hit inflows from Chinese tourists. On the hand, overall export growth is seen moderating against a backdrop of increasing trade tensions.