- Thai Economy in the second quarter of 2010 grew by 9.1 percent, thus the first half of 2010 Thai economy expanded by 10.6 percent. This was supported by the recovery of the world economy and the investor confidence — which led to the improvement of production, exports, investment, and private consumption. In addition, farm income rose due to higher prices of major agriculture products. Nonetheless, domestic political unrest has dampened inbound tourists’ confidence, as a consequence, the number of foreign tourists declined by 3.6 percent.
- After seasonal adjustment, the economy continued to grow from the previous quarter by 0.2 percent, the fifth-consecutive-quarter expansion since the second quarter of 2009.
- The economic forecast for 2010 is expected to be in the range of 7.0 — 7.5 percent. With regard to the assessment of economic outlook, exports and private consumption are forecasted to grow by 25.7 and 4.1 percent respectively. Tourism and investment are expected to expand by 4.7 and 9.2 percent, consecutively, providing that domestic political situation remains stable. Consequently, key economic indicators are forecasted as follows: (i) headline inflation between 3.0 — 3.5 percent; (ii) unemployment rate at 1.3 percent; and (iii) current account surplus of 4.9 percent of GDP.
- The economic management for the rest of 2010 should emphasize the following issues: (i) improve country image in order to restore confidence of foreign tourists and investors. At the same time, the government should expedite the implementation of national reconciliation plan to ensure the constant improvement of domestic political condition and general economic confidences; (ii) resolve key limitations to economic expansion, especially the Map Ta Phut Industrial Estate environmental regulations problem and related issues under the Section 67 of the 2007 Constitution, as well as, labor shortage in key manufacturing sectors; (iii) monitor and mitigate the impacts of drought on agricultural production as well as maintain the stability of agricultural prices in the presence of Thai baht appreciation against the constant devaluation of Vietnamese’s Dong; (iv) speed up key investment projects under the Thai Khem Kaeng Stimulus Package (SP2) and prepare key projects under the budget of FY2011 to be ready for implementation in the last quarter of 2010 and the first quarter of 2011 when the world economy tends to slowdown; and (v) implementation of well-balanced monetary and exchange rate policies to maintain economic stability and to facilitate economic expansion under the pressure from Thai baht appreciation as well as an increase in volatility of capital flow and exchange rate movement of major currencies .
Economic Forecast Year 2010
(% YOY) 2009 2010
Year Q1 Q2 Projection
GDP (at 1988 price) -2.2 12.0 9.1 7.0-7.5
Total Investment
(at 1988 price) -9.0 12.9 12.2 9.2
Private -12.8 15.8 18.5 12.1
Public 2.7 3.8 -3.4 1.7
Total Consumption
(at 1988 price) -0.1 4.5 6.5 4.0
Private -1.1 4.0 6.5 4.1
Public 5.8 7.3 6.3 3.9
Export of Goods, -13.9 32.0 41.8 25.7
Volume -14.0 16.5 28.3 17.2
Import of Goods, -24.9 63.6 44.8 32.9
Volume -22.7 47.4 30.2 24.9
Current Account to
GDP (%) 7.8 6.7 6.0 4.9
Inflation -0.8 3.8 3.3 3.0-3.5
Unemployment rate 1.5 1.1 1.3 1.3
In the second quarter of 2010, Thai economy grew by 9.1 percent, a faster-thanexpected recovery. Such expansion was mainly supported by a strong recovery in both global economy as well as consumer and investor confidence. Additionally, manufacturing productions, exports, and private investment and consumption collectively improved while farm income also rose amid a rise in crop price. Nevertheless, the political unrest adversely affected tourists’ confidence which, as a result, led to a contraction of 3.6 percent in the number of inbound tourists. The seasonally adjusted GDP grew by 0.2 percent compared to the previous quarter, a fifth consecutive expansion since the second quarter of 2009. For the first half of the year, the economy recorded a solid growth of 10.6 percent.
Positive signs in Q2/2010
(1) Exports considerably expanded. Export values in term of US dollar surged by 41.8 percent, up from a 32.0 percent growth in the previous quarter. The key drivers included a 97.1 percent growth of vehicles, parts and accessories, a 43.5 percent growth of electrical appliances, a 37.2 percent growth of air conditioning machine, and a 236.6 percent growth of precious stones and jewellery.
(2) Household consumption continued to rise from the previous quarter with a growth of 6.5 percent owing to an increase in crop price which grew by 27.8 percent, particularly rubber (108.7 percent), cassava (93.8 percent) and maize (26.9 percent) prices. As a result, farm income rose by 30.0 percent while other conditions such as employment remains favorable. Unemployment rate stood at only 1.3 percent.
(3) Private investment remarkably grew by 18.5 percent, compared to an increase of 15.8 percent in the previous quarter. Such expansion can be seen in both construction as well as equipment investment, indicated by domestic cement sales and import of capital goods which grew by 12.2 and 35.2 percent respectively, up from 7.2 and 23.8 percent in the previous quarter.
(4) Manufacturing production expanded by 18.0 percent, especially domestic-oriented industries such as passenger cars, motorcycles, construction materials, steel and steel products as well as rubber and rubber products which grew by 93.9, 36.3, 10.4, 32.7 and 16.8 percent respectively following a recovery in domestic demand as well as a better prospect in construction sector. The capacity utilization stood at 66.1 percent compared to 58.4 percent at the same period of last year.
Although the political unrest in the second quarter adversely affected the tourism sector, leading to a contraction of 3.6 percent with only 2.9 million of inbound tourists, the total number of inbound tourists stood at 7.5 million persons for the first half of the year, or up by 13.7 percent compared to the same period of last year. This clearly indicated a strong potential of the tourism sector as a key driver for the Thai economy.
"...Thai economy grew by 9.1 percent in the second quarter of 2010. As a result, it recorded a growth of 10.6 percent for the first half. "
Thai Economic Outlook for 2010
For the year 2010, the economy is expected to expand in the range of 7.0 — 7.5 percent, with 3 .0 — 3 .5 percent of headline inflation and 0 — 1 .2 5 percent of core inflation. Household onsumption is projected to grow by 4.1 percent while investment is estimated to expand by 9.2 ercent. Export value in US dollar term is forecasted to grow by 25.7 percent, with a current ccount surplus of 4.9 percent of GDP, down from a surplus of 7.8 percent of GDP in 2009. It hould be noted that the above forecasts are based on the following conditions: (i) the political ituation remains calm at least for the rest of the year; and (ii) the inflation rate is expected to ase off, partly due to the high base effect.
"...Thai economy is projected to expand in the range of 7.0 - 7.5 percent in 2010. "
1. Economic Performance in Q2/2010
Expenditure Side
Household consumption expenditure: continued to expand from the previous quarter with the rate of 6.5 percent accelerated from 4.0 percent in the first quarter. Key supporting factors to his improvement were: i) an increase in employment especially in the construction sector; ii) an increase in farm income following an improvement in price of agricultural products, resulted from n increase in global demand in accordance with recent economic recovery; and iii) the improvement in consumer confidence following the implementation of SP2 which stimulated omestic consumption reflected in the continuing increase of 32.2 percent in durable goods consumption such as passenger cars and air conditioners. In addition, consumer confidence ndex on economic situation over the second quarter of 2010 stood at 68.0, declined from 70.9 in the previous quarter due to an impact of political unrest during March - Mid-May 2010. evertheless, the consumer confidence index in this quarter recorded a significant improvement in May and continued to expand in June resulted from the implementation of government ehabilitation measures which partially regained the consumers’ confidence.(1)
"...Household consumption expenditure expanded by 6.5 percent owing to an increase in employment and farm income..."
Private Consumption
%YoY 2009 2010
Year Q1 Q2 Q3 Q4 Q1 Q2 H1
Private Consumption -1.1 -2.5 -2.2 -1.3 1.4 4.0 6.5 5.3
Durable goods -8.2 -18.0 -13.8 -8.5 8.8 29.8 32.2 31.0
Semi-durable goods -6.7 -8.6 -9.1 -10.3 0.7 11.2 7.4 9.3
Non-durable goods 0.0 -1.6 -1.3 0.9 2.1 1.5 1.4 1.4
- Food 1.4 1.2 -0.2 3.2 1.4 0.9 1.7 1.3
- Non-food -1.0 -3.7 -2.0 -0.8 2.6 1.9 1.2 1.5
Service 2.9 7.1 4.8 2.8 -2.0 -4.3 5.6 1.0Source: NESDB
Private Investment increased by 18.5 percent, continued to expand from the 15.8 percent of growth in the previous quarter. The escalation was attributed by an increase in both equipment and construction by 21.7 and 8.4 percent respectively. Such expansion was reflected in the growth rate of 21.2 percent of private investment index, 35.2 percent of import of capital goods and 37.3 percent of domestic commercial car sales. In addition, domestic cement sales and construction area permitted also boosted up by 12.2 and 10.4 percent respectively.
"...Private investment expanded further from the previous quarter in both equipment and construction. "
Note
(1) Consumer confidence index on economic situation for the first half of 2010 stood at 69.4.
Business Sentiment Index (BSI) in the second quarter was at 49.3, slightly dropped from 52.5 in the previous quarter due to the anxiety about domestic political unrest started in March. Thus, BSI in April considerably decreased to 46.0 from 55.7 in March. Nevertheless, after the end of disruptive political unrest in mid-May, BSI picked up to 49.9 and 52.1 in May and June respectively.
"...Export value increased by 41.8 after the expansion of 32.0 percent in the first quarter. Export markets expanded in both major markets and other markets. "
Export: both value and volume increased. In the second quarter of 2010, export value in US dollar term increased by 41.8 percent after an expansion of 32.0 percent in the first quarter. The export volume and price also gained by 28.3 and 10.0 percent respectively. Excluding unwrought gold, the export value expanded by 33.9 percent. The expansion was caused by an increase in a speculation of unwrought gold. In addition, it was due to a recovery of foreign demand as the global economic condition improved, the implementation of ASEAN Free Trade Area (AFTA) and a low base effect. The export of manufacturing products continued to expand. In contrast, the agricultural sector was affected by the drought, causing a shrink in supply and thus leading to a higher price of agricultural products. In terms of Thai baht, export value picked up by 32.3 percent.
The export of agricultural commodities continued to expand. Export price grew by 48.5 percent while its volume dropped by 7.7 percent leading to an increase of 37.1 percent in export value. Similarly, both volume and value of manufacturing products continually grew by 35.0 and 42.9 percent respectively, while export price slightly increased by 5.9 percent. Major exported commodities were electronics and electrical appliances of which export value rose by 24.2 and 40.1 percent respectively as a result of higher orders. Export value of food products (excluding sugar) expanded by 14.7 percent. The food products which recorded an expansion in export value were frozen and processed shrimps (17.0 percent); and canned, fresh, frozen and processed vegetables and fruits (9.7 percent). However, when classified by product group, high-technology products and resource-based products experienced the increase of 37.2 and 27.5 percent respectively. Export of labor-intensive products significantly grew by 111.0 percent compared to a contraction of 40.8 percent in the first quarter due to an increase in export of unwrought gold which accounted for 54.3 percent of total exported labor-intensive products.
Export market expanded in both major markets and other markets, particularly in ASEAN (9) of which export value increased by 45.3 percent. Similarly, export to China, US, Japan and EU(15) experienced an expansion in export value of 30.7, 26.4, 34.6 and 24.1 percent respectively. Regarding new markets, the value of export to Australia, South Korea, Taiwan and India rose by 97.6, 41.7, 36.1 and 25.2 percent respectively.