(Repeats to more subscribers; recasts with outlook, fresh
* Q1 GDP -2.1 pct q/q and -0.6 pct y/y, worse than forecast
* Political turmoil hits demand, tourism; exports still weak
* Some economists see central bank reluctantly cutting rates
* Political events this week may determine if crisis near
By Orathai Sriring
BANGKOK, May 19 Thailand's economy shrank more
than expected in the first quarter as exports remained weak and
domestic activity was battered by months of political unrest,
adding to fears the country is sliding into recession.
Gross domestic product (GDP) contracted 2.1 percent in
January-March from the previous three months and was 0.6 percent
smaller than a year earlier, the state planning agency NESDB
said on Monday.
A Reuters poll of economists had forecast GDP in
January-March to shrink by 1.6 percent on the quarter and to
grow 0.1 percent on the year.
The planning agency chopped its 2014 GDP growth forecast to
between 1.5 and 2.5 percent from 3.0-4.0 percent.
Thailand has been without a proper government since last
December and anti-government protesters have promised a final
push to oust the caretaker government by May 27. Their leader
says he will surrender to the authorities if they fail.
"It's likely there'll be recession in the second quarter
because all the figures came in bad. But we also have to wait
and see the political situation on May 26-27," said Pragrom
Pathomboorn, an economist with KGI Securities.
"If it ends well, the second half will get better. But if it
drags on without a functioning government in the third quarter,
we think the economy will grow just 0.8 percent this year."
The political crisis flared up in November. The NESDB
revised its figure for fourth-quarter 2013 growth to just 0.1
percent from 0.6 percent, compared with the previous quarter.
Expansion in the rest of Southeast Asia highlights the
political drag in Thailand: Malaysia reported annual growth of
6.1 percent in the first quarter while Indonesia, the largest
economy in front of Thailand, grew 5.2 percent.
In the first quarter, private consumption and investment
growth were worse than expected, "signalling that the impact
from the current political impasse on the economy may have been
greater than we thought," said Gundy Cahyadi, an economist with
DBS Bank in Singapore.
"Chances are we are going to see another technical recession
in the economy, given that the second-quarter GDP number is
likely to be rather poor as well," said Cahyadi, who now expects
2014 full-year growth of less than 2 percent.
Public sector investment fell 19.3 percent in the first
quarter from a year before and private investment fell 7.3
percent, the NESDB said, with overall spending down 9.8 percent.
PRESSURE ON CENTRAL BANK
Now, pressure will increase on the central bank to cut
interest rates at its June 18 policy meeting. However, the
minutes of the Bank of Thailand's April meeting, when it left
the policy rate at 2 percent, said the leeway for
easing was limited and the central bank was worried about
indebted households and small firms.
"The weaker-than-expected GDP data will put the spotlight
back on the Bank of Thailand," said Benjamin Shatil, an
economist with JP Morgan in Singapore.
"But when domestic activity is being weighed down by falling
sentiment amid an uncertain political environment, there is only
limited support that monetary policy can provide to the
economy," he added.
Thai consumer confidence is at a 12-year low, tourists are
staying away from Bangkok and public spending has slumped. Many
parts of the economy are feeling the pinch, even the property
sector, which proved resilient during previous bouts of unrest.
"If the political crisis drags on until the end of this
year, the overall sector could see a contraction of as much as
10 percent," Rutt Phanijphand, chief executive of home builder
Quality Houses, said last week.
The political turmoil is also hurting Thailand's big auto
sector, which accounts for 11 percent of GDP and is the largest
in Southeast Asia. Domestic car sales are falling and some
30,000 industry jobs have been lost his year.
Thai Airways reported a quarterly loss last week
and expects more red ink in the second and third quarters as "we
have been severely affected by the politics", Chairman Prajin
BIG HIT ON TOURISM
Tourism accounts for about 10 percent of GDP and visitors
dropped about 5 percent in January-April from a year earlier.
This month, the Tourism Authority of Thailand cut its forecast
for 2014 tourist arrivals to 26.3 million, the lowest in five
years, from 28 million.
The NESDB said hotel occupancy in the first quarter stood at
60.3 percent against 72.1 percent in the same period last year.
Some analysts expect exports, which are equivalent to more
than 60 percent of GDP, to pick up on the back of a global
recovery. So far, the political unrest has been largely
contained to Bangkok and has not disrupted ports and factories.
But on Monday, the state planning agency cut its projection
for export growth this year to 3.7 percent from an earlier
In January-March, exports fell 0.8 percent from a year
earlier and about 0.5 percent from the previous three months,
central bank data showed.
($1= 32.4 baht)
(Additional reporting by Kitiphong Thaichareon and Pairat
Temphairojana; Editing by Richard Borsuk and Alan Raybould)