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By Orathai Sriring and Kitiphong Thaichareon
BANGKOK– Thailand’s economy expanded at its slowest pace in nearly five years in the second quarter as traditional growth drivers sputtered, which led the government to significantly cut its forecast for full-year expansion.
The state planning agency, reporting April-June data on Monday, reduced its forecast for 2019 growth to 2.7-3.2%, versus 3.3%-3.8% seen in May. It also sharply changed its estimate for this year’s exports, now seeing 1.2% shrinkage instead of 2.2% growth.
The downwardly-revised forecasts for 2019 come at a time of rising global trade tensions and as Thai exporters fret about strength of the baht, which has gained more against the dollar than any other Asia currency this year.
Trade-reliant Thailand, the region’s second-largest economy, reported second-quarter growth of 2.3% from a year earlier.
That was just below the 2.4% seen in a Reuters poll and well down from the 2.8% pace for January-March.
On a quarterly basis, growth was a seasonally adjusted 0.6%, weaker than the poll’s 0.7% forecast and the January-March’s 1.0%.
Capital Economics said it expects the economy to remain weak, projecting 2019 growth of 2.5% and then 3.0% next it year.
Charnon Boonnuch of Nomura said he expects second half growth to rise to 3.4% from 2.6% in the first, helped by fiscal and monetary policy easing.
All Southeast Asian economies except Malaysia have reported slower annual growth in the second quarter than the first, hurt by the U.S.- China trade war and cooling global demand.
Thailand’s exports contracted 4.2% in the second quarter from a year earlier. In 2018, they rose 7.5%.
The planning agency said economic growth should be firmer in the second half than the first, boosted by government stimulus measures.
Thailand is planning a $10 billion stimulus package in a bid to get GDP growth of at least 3% this year, and 3.5% next year, according to Finance Minister Uttama Savanayana.
But as the Thai economy is increasingly reliant on external demand, it’s hard for such policies and measures “to truly make a significant impact on the slowing economy,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
The April-June growth pace was affected by smaller gains from tourism and domestic consumption as high household debt restrained consumer spending.
In April-June, private consumption rose 4.4% from a year earlier and private investment rose 2.2%, while public consumption rose 1.1%, crimped by the delayed formation of a government after March’s elections, planning agency data showed
Annual growth in foreign tourist numbers slowed to 1.1% in the June quarter from the previous period’s 1.8%.
Given increased risks to growth, benign inflation and the strong baht, most economists expect the central bank to cut its key interest rate later this year after a surprise easing on Aug. 7. The next policy review is Sept. 25.
($1 = 30.90 baht)
(Editing by Richard Borsuk)