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25 May 2009

Thailand enters recession as GDP slips 7% in Q1

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Thailand’s economy shrank more than expected in the first quarter, contracting the most in a decade as the nation slid into a recession, reported Bloomberg News.

Gross domestic product fell 7.1 percent last quarter from a year earlier, after declining a revised 4.2 percent in the previous three months, the government said today. The median estimate of 17 economists in a Bloomberg survey was for a 6.5 percent drop.

“The first quarter should be the worst,” said Rajeev Malik, a Singapore-based economist at Macquarie Group Ltd. “There is a strong likelihood the economy will grow in the fourth quarter.”

The government has boosted spending on training, cash handouts and public works to buoy consumption after the worst global economic slump since World War II and political protests hurt Southeast Asia’s second-largest economy. The central bank said last week there are signs the contraction is moderating.

The government “will do whatever we can” to ensure economic expansion by this year’s final quarter, Prime Minister Abhisit Vejjajiva said on May 20. The same day, the Bank of Thailand ended its most aggressive string of rate cuts ever, keeping borrowing costs at 1.25 percent even while saying risks to the economy remain.

Production has picked up in electronic and automotive industries and exports, and consumer demand is recovering, Finance Minister Korn Chatikavanij said May 7.

“Orders have started to come back,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries, a group of manufacturers. “The worst is behind us and things should get better now.”

Thailand’s economy will contract less each quarter before returning to growth in the final three months of this year, the median estimate of the economists surveyed by Bloomberg shows.

Exports, Thailand’s main economic driver, declined 20 percent in the first quarter. They’ve fallen for six months through April, the longest contraction in seven years.

“I don’t see any strong sign of recovery yet,” said Veeravat Kanchanadul, Senior Executive Vice President at Charoen Pokphand Group, Asia’s biggest animal-feed producer. “We can’t be sure about the state of the economy when small players are still struggling.”

Manufacturing declined 14.9 percent in the first quarter, compared with a revised 6.7 percent drop in the previous three months. Private consumption fell 2.6 percent. Total investment retreated 15.8 percent.

GDP may shrink as much as 3.5 percent this year, the government’s National Economic & Social Development Board said today. That would be the first annual contraction in 11 years and matches the median estimate of economists surveyed by Bloomberg.

Consumer confidence is at its lowest level in seven years. An emergency decree was imposed for 13 days in Bangkok last month to quell anti-government riots that left two people dead.


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