Thai Recession Probably Eased Amid Global Recovery

By Suttinee Yuvejwattana

Nov. 20 (Bloomberg) -- Thailand’s economy probably contracted the least in a year last quarter as a nascent global recovery and government spending began to pull the nation out of its first recession in a decade.

Gross domestic product fell 3.2 percent in the third quarter from a year earlier, after contracting 4.9 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. The government will release the data on Nov. 23 at 9:30 a.m. in Bangkok.

The benchmark stock index has risen two straight quarters since the start of April and the baht gained 4.5 percent against the U.S. dollar this year as companies including Hana Microelectronics Pcl report rising orders. Prime Minister Abhisit Vejjajiva said yesterday the government will pursue its stimulus spending plans amid lingering “political problems.”

“A gradual global recovery, fiscal stimulus packages and easy money policy are resulting in improved GDP performance,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “The improvement will be gradual. This is barring any grave political developments.”

Singapore, which raised its 2009 GDP estimate in October, said yesterday its economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year. Malaysia may report today that its recession eased last quarter, according to a Bloomberg News survey.

Interest Rates

The Bank of Thailand said last month Southeast Asia’s second-largest economy is “out of recession”, citing improving employment and quarter-on-quarter GDP expansion. Still, the central bank refrained from raising borrowing costs for a fourth straight meeting on Oct. 21 as it judged the nation’s economic recovery to be at “an early stage.”

There may be cause to keep interest rates low for a while as economists including Morgan Stanley Asia Chairman Stephen Roach say the global recovery faces risks.

“My outlook remains extremely cautious although we can see the worst is over” for the global economy, Roach said in Singapore today. Asian economies are still too export dependent, he said.

Thailand’s consumer confidence fell for the first time in five months in October on concern that the economic recovery may be derailed by rising oil prices, politics and a court case that has stalled 76 government-approved projects on pollution complaints.

Political Risk

At least five people were injured after a bomb exploded at a Nov. 15 protest against former Prime Minister Thaksin Shinawatra, the Nation newspaper reported this week. Power in Thailand has shifted between parties allied to Thaksin and his opponents since the 2006 coup that ousted him, with protests and leadership changes hurting successive governments’ ability to implement spending plans.

Abhisit’s government has managed to stay in power for almost a year and implemented a 116.7 billion-baht stimulus package in the first half of 2009. It plans to spend 1.3 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.

The fiscal spending helped “stop the economic contraction” and prevented unemployment from jumping, Abhisit said Nov. 16.

“Our only concern is politics,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries. “If the political stability continues like this, the economy can move ahead. If not, things may turn bad again.”

Return to Growth

The government expects the Thai economy to return to growth this quarter. Thailand’s exports dropped the least in 11 months in September as more than $2 trillion in stimulus by governments worldwide helped revive global demand.

Hana Microelectronics, which makes parts for computers and mobile phones including Apple Inc.’s iPhone, has restored its workforce to “pre-crisis” levels and will spend about $20 million by March 31 to expand capacity and meet rising demand, Chief Executive Officer Richard Han said.

“We continue to see robust demand,” said Han. “We expect the fourth-quarter performance to be an improvement over last year.”

The central bank has kept its benchmark interest rate unchanged at 1.25 percent since cutting it by 2.5 percentage points from December to April. Thai consumer prices rose for the first time in October after falling for nine consecutive months.

“The recovering global economy will lead to improving exports and tourism,” Abhisit said yesterday. “The government is also committed to spend money under our stimulus plan. Everything still goes as planned despite political problems” that may persist into next year, he said.

To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net