Thai economic growth dropped to 5.3 percent in the second quarter, official figures showed yesterday, as political uncertainty, soaring inflation and weak domestic demand hit the kingdom.
The National Economic and Social Development Board said GDP growth at an annual rate was down from a revised 6.1 percent in the first quarter of the year.
The board’s secretary-general, Amphon Kittiamphon, said the decline was because of lower government spending and a slowdown in private sector investment.
Despite that, the board forecast the Thai economy would likely grow between 5.2 percent and 5.7 percent this year, up from its May projection of 4.5 percent and 5.5 percent.
“If the government pushes forward with its mega projects including infrastructure construction, as well as creating confidence among investors, our GDP in the last six months of this year is most likely to be no less than 5.2 percent,” Amphon told reporters.
Volatile global oil prices have already prompted Thailand’s central bank to lower its growth estimates for this year to 4.8 percent to 5.8 percent. The finance ministry had initially projected 6 percent.
Inflation soared to a 10-year-high of 9.2 percent last month. The Bank of Thailand has estimated that inflation will average 7.5 percent to 8.8 percent this year.
Analysts said the second quarter slowdown likely indicated the Bank of Thailand will hike interest rates just once more this year from the current level of 3.5 percent. Its rate-setting committee is due to meet tomorrow.
“[These economic conditions] will limit central bank tightening,” Standard Chartered economist Usara Wilaipich told Dow Jones Newswires. “Therefore, we expect only one more 25-basis-point hike from the Bank of Thailand and this should be the last rate hike for the rest of this year.”
The central bank and the finance ministry have reportedly been at loggerheads over the interest rate and how to handle the inflation surge.
The English-language Bangkok Post reported last week that King Bhumibol Adulyadej voiced support for central bank governor Tarisa Watanagase.
Thailand’s government, which was formed in February, has been hit by street protests since May demanding the resignation of Prime Minister Samak Sundaravej.
Rumors of a coup circulated in May and June, and the general uncertainty has helped push the Thai stock market down nearly 18 percent since late May.
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