Thai economic growth strengthens in Q4 but election could impact 2019 pace

THAILAND - BANGKOK. Thailand's economy grew at its best pace in six years in 2018, with fourth-quarter beating expectations on higher domestic demand and record tourism arrivals.

The state planning agency on Monday cut its forecast for 2019 exports, the main growth driver, but maintained the 3.5-4.5 percent economic growth projection it made in November.

Growth data released on Monday is the last before Thailand holds an election on March 24 - the first since a 2014 military coup - that might cause political uncertainty.

Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said "it is too early days to revise forecasts given the plethora of variables that can impact estimates i.e. Sino-US trade tensions, Brexit and Thai general elections and what economic and social policies will be pursued."

In October-December, the economy grew a seasonally adjusted 0.8 percent from the previous three months, National Economic and Social Development Council data showed. That was faster than 0.6 percent seen in a Reuters poll and the revised 0.3 percent shrinkage for July-September.

On an annual basis, growth in Southeast Asia's second-largest economy, was 3.7 percent, compared with a poll forecast of 3.6 percent, and the July-September quarter's revised 3.2 percent.

Struggle for momentum?

The agency put 2018 growth at 4.1 percent, the highest since 2012. Growth for 2017 was revised to 4.0 percent, from 3.9 percent

"GDP growth in Thailand picked up in Q4, but it is likely to struggle for momentum in the quarters ahead due to weaker external demand," said Capital Economics, which forecasts 3 percent for this year.

"The key risk to the outlook is the possibility of unrest if the electorate feels it is being denied free and fair elections, expected to be held on 24th March."

The government lowered its 2019 export growth outlook to 4.1 percent from 4.6 percent. Thailand's exports, worth about two-thirds of economy, increased 7.7 percent in 2018, slowing from 2017's rise of about 10 percent.

Headline growth in Thailand's trade-driven economy has picked up in recent years on global economic recovery. But it is still not firing on all cylinders, with substantial excess industrial capacity.

Growth remains heavily reliant on exports in the face of the U.S.-Sino trade war, while a recovery in private consumption has been constrained by high household debt.

Annual exports in the December quarter rose at a slower pace of 2.3 percent, while private consumption increased 5.3 percent from a year earlier, and private investment was up 5.5 percent. Public investment contracted 0.1 percent, NESDC data showed.

In the 2018's last three months, tourist arrivals rose 4.3 percent from a year earlier, up for 1.9 percent the previous quarter, as the number of Chinese visitors - reduced by a July boat accident that killed 47 - rebounded.

With inflation low, most analysts expect the Bank of Thailand to keep its policy rate unchanged for now after December's rate hike, but some predict further tightening when the central bank reviews policy on March 20.