By Suttinee Yuvejwattana and Michael Munoz
May 22 (Bloomberg) -- Thailand’s economy probably slid into a recession in the first quarter, shrinking the most since the Asian financial crisis a decade ago.
Gross domestic product fell 6.5 percent last quarter from a year earlier, after contracting 4.3 percent in the previous three months, according to the median estimate of 17 economists surveyed by Bloomberg News. The government will release the data on May 25 at 9:30 a.m. in Bangkok.
“Exports deteriorated markedly,” said Radhika Rao, an economist at IDEAglobal Ltd. in Singapore. “Investment interest was also likely sluggish against the backdrop of simmering political tensions.”
The government has boosted spending on training, cash handouts and public works to buoy consumption as the worst global economic slump since World War II and political protests hurt Southeast Asia’s second-largest economy. The central bank, which this week ended its most aggressive string of rate cuts ever, says there’s signs the contraction is moderating.
“The economy possibly hit the bottom in the first quarter,” said Somprawin Manprasert, an economist at Tisco Securities Ltd. in Bangkok. “There are some positive signs but it doesn’t mean the recovery has started. We will go through periods of moderate contraction and may pick up next year.”
‘Worst is Over’
The government “will do whatever we can” to ensure economic expansion by this year’s final quarter, Abhisit said on May 20, the same day the Bank of Thailand kept interest rates at 1.25 percent, saying economic indicators are showing a more “moderate” contraction even as 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.
“Things improved in the past six weeks,” Richard Han, chief executive officer at Hana Microelectronics Pcl, said May 20. “The worst is over.”
Thailand’s economy will contract less each quarter before returning to growth in the final three months of this year, based on the median estimate of the economists surveyed by Bloomberg News. Singapore and Taiwan governments yesterday said their economies are showing signs of recovery.
Exports, Thailand’s main economic driver, declined for a sixth straight month in April, the longest contraction in seven years, the Commerce Ministry said May 20. Industrial output slid for a fifth month in March as exporters curbed output and cut jobs, the central bank said April 30.
Sales Hurt
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.
“It’s very difficult to do business amid unpredictable events like this,” said Pornrat Janejarassakul, vice president of Advanced Info Service Pcl, the nation’s biggest mobile-phone operator. “Our sales have been hurt by the political turmoil.”
Advanced’s profit slid 11 percent in the first quarter as service and rental revenue declined. The average share price of companies trading in Thailand’s benchmark SET Index fell to 8.3 times earnings in the three months to March 30, compared with 15 times a year earlier.
Thailand’s economy hasn’t shrunk for two straight quarters since the first three months of 1999. That was the last of eight quarterly contractions triggered two years earlier, when the nation cut a peg to the dollar that had overvalued the baht and slashed exports. The economic crisis eventually extended to the Philippines, Indonesia, Malaysia, Taiwan and South Korea.
Election Pledge
Prime Minister Abhisit Vejjajiva has pledged to call elections once stability is restored in the nation of 66 million people. The protesters say the prime minister’s rule is illegitimate because he came to office after a court dissolved the former ruling party.
Power in Thailand has shifted between parties allied to former Prime Minister Thaksin Shinawatra and his opponents since the 2006 coup that ousted him, hurting successive governments’ ability to implement spending plans.
Abhisit’s seven-party coalition is strong enough to pass a borrowing plan and next year’s 1.7 trillion-baht ($49 billion) budget, he said this week. That’s in addition to a 1.4 trillion- baht, four-year investment plan, and a 116.7 billion-baht stimulus package aimed at stemming this year’s economic slide.
Following are forecasts for Thailand’s GDP compiled by Bloomberg News:
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1Q 1Q 2Q 3Q 4Q GDP GDP
Firm QoQ% sa YoY% YoY% YoY% YoY% 2009 2010
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Median -1.7% -6.5% -5.2% -4.3% 1.2% -3.5% 3.0%
Average -1.8% -6.6% -5.3% -4.2% 1.3% -3.7% 3.1%
High -0.5% -4.9% -4.1% -2.9% 3.5% -3.0% 4.5%
Low -4.6% -9.5% -7.0% -6.0% -1.1% -4.9% 1.5%
Number of Estimates 12 17 11 11 11 13 12
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Action Economics -0.5% -5.6% -5.6% -4.3% 3.5% -3.0% 3.0%
ATR-Kim Eng Capital -- -7.0% -5.2% -3.0% 1.4% -3.5% 2.8%
Barclays Capital -0.8% -5.8% -- -- -- -- --
Citi -0.6% -4.9% -- -- -- -- --
DBS Group -1.8% -6.8% -- -- -- -3.5% 3.8%
HSBC -0.9% -6.0% -5.8% -5.1% 2.6% -3.5% 3.0%
Ideaglobal -- -6.5% -- -- -- -3.5% --
ING Groep NV -3.0% -7.9% -- -- -- -- --
JP Morgan Chase -2.5% -7.1% -6.2% -4.7% 2.0% -4.0% 4.0%
Kasikorn Research -1.5% -6.5% -6.1% -5.7% 0.5% -4.5% 2.5%
KTB Securities -- -6.8% -4.8% -3.5% 1.2% -3.5% 3.8%
Macquarie Capital -- -5.5% -- -- -- -- --
Moody’s Economy.com -4.6% -9.5% -4.5% -3.0% 3.0% -3.5% 2.8%
Phatra Securities -1.6% -6.0% -4.6% -3.0% 0.6% -3.3% 2.9%
Reuters IFR -2.5% -7.5% -7.0% -6.0% 1.1% -4.9% 4.5%
Standard Chartered -- -5.8% -4.1% -2.9% -1.1% -3.5% 1.5%
Tisco Securities -1.7% -6.5% -4.1% -4.9% -0.1% -3.9% 2.7%
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To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.netMichael J. Munoz in Hong Kong at mjmunoz@bloomberg.net
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