GDP growth accelerates in Q2, beats market expectations

GDP reading: The economy gathered pace in the second quarter, expanding 2.3% year on year and marking the fastest increase since Q1 2023. Q2’s reading was above both market expectations and Q1’s upwardly revised 1.6% rise. On a seasonally adjusted quarter-on-quarter basis, economic growth lost momentum, cooling to 0.8% in Q2 from the previous period's 1.2% expansion.

Drivers: Domestically, the upturn chiefly reflected rebounding government spending, which rose 0.3% year on year in Q2 (Q1: -2.1% yoy); social transfers returned to growth and public-sector compensations continued to expand. Less positively, still-tight financing conditions continued to weigh on household budgets: Private consumption growth cooled to 4.0% year on year in Q2 (Q1: +6.9% yoy). Meanwhile, fixed investment fell 6.2% in April–June—deteriorating from Q1’s 4.2% drop and marking the worst reading in four years—as contracting private investment outweighed a softer decline in public investment. On the external front, exports of goods and services increased 4.8% on an annual basis in the second quarter, which was above the first quarter's 2.5% expansion; rebounding goods exports more than offset a downtick in momentum in services exports. Conversely, imports of goods and services growth waned to 0.5% in Q2 (Q1: +5.2% yoy). As a result, the external sector added impetus to the headline reading.

GDP outlook: Our panelists expect the economy to continue to pick up steam in H2 on the back of a steady recovery in external demand. Overall in 2024, our Consensus is for economic growth to outpace 2023’s level and fall broadly in line with the National Economic and Social Development Council (NESDC)’s revised projection of 2.3–2.8%. That said, risks are skewed to the downside and include a protracted malaise in key export market China, a slower-than-expected government budget disbursement and political instability.

Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja and Sathit Talaengsatya commented: “However, the near-term growth outlook is fraught with downside risks. Key concerns include shocks to the tourism sector, including the global outlook of new diseases, particularly the mpox outbreak, which has been recently announced as a public health emergency of international concern by WHO; slower-than-expected private consumption due to sluggish loan growth, tightening financial conditions, and eroded household wealth; a weaker-than-anticipated recovery in exports and private investment; a slower-than-expected government budget disbursement.”

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