2nd-quarter recovery

The economy showed signs of recovery in the second quarter, thanks to increased domestic demand and higher-than-expected export growth.

Amara Sriphayak, senior director for private consumption and investment at the Bank of Thailand (BOT), said the second quarter improved from the first because of government stimuli, low interest rates and inflation and improved business confidence.

The Business Confidence Index's investment component registered 50.7 points last month, passing the 50-point mark for the first time this year. This indicates investor confidence is improving and that they are ready to spend again, she said.

"The economy will probably bottom out, but I don't dare conclude that," she said.

The bank's Monetary Policy Committee meeting next month will evaluate the situation and may revise economic forecasts.

Amara said improved domestic demand was in line with BOT projections made in April but that export growth was higher than expected, due to better performance in the economies of trading partners.

"We predicted consumption and investment would accelerate in the second quarter, leading to a rise in imported goods, and as a result the economy won't grow a lot," she said.

Without negative factors, the economy will continue to grow, spurred by government spending, decreasing interest rates and an improved political situation.

The Private Consumption Index (PCI) in April and May declined 0.4 per cent year on year, compared with a 0.5-per-cent contraction in the first quarter. The Private Investment Index (PII) in April and May was down 2.7 per cent year on year, compared with a 3.9-per-cent contraction in the first quarter.

Calculated on a month-on-month basis, the PCI in May rose 1 per cent, compared with a 0.4-per-cent decrease in April. Passenger-car and motorcycle sales grew 23.8 per cent and 25.8 per cent, respectively, said the BOT.

The PII in May was up 1 per cent month on month, compared with 1.2-per-cent growth in April. Real imports of capital goods increased 2.4 per cent, higher than the 1.9-per-cent growth of the previous month.

Exports grew 19.9 per cent last month, thanks mostly to an increase in export quantity. Exports in April and May rose 18.3 per cent year on year, compared with 18.5-per-cent growth in the first quarter.

Total imports in the first two months of the second quarter were up 9.3 per cent, higher than the 5.3-per-cent growth in all of the first quarter. Last month, growth escalated 6.2 per cent, due mainly to vehicle, raw-material and capital-goods imports.

The trade surplus was US$400 million (Bt13.81 billion) in April and May, compared with a first-quarter surplus of $3.6 billion. The current-account surplus was $100 million, lower than the first quarter's $4.9 billion.

Amara said external stability remained in line with earlier bank projections.

Anoma Srisukkasem

The Nation