Thailand’s economy grew more than analysts estimated in the second quarter as the military government accelerated spending on road and rail projects to help offset weak demand for the nation’s exports.
Gross domestic product expanded 3.5 percent in the three months through June from a year earlier, the National Economic and Social Development Board said in Bangkok Monday. That compares with the 3.3 percent median estimate in a Bloomberg News survey of 22 analysts. GDP grew 0.8 percent from the previous three months, compared with a 0.5 percent median estimate.
The central bank earlier this month kept its key interest rate unchanged, opting to preserve its scope for future action and allow time for the government’s fiscal spending to kickstart growth. While investor confidence was bolstered by the peaceful completion of a national vote on the constitution on Aug. 7, a series of bomb attacks in Thailand’s southern provinces late last week will test the resolve of a military government that has made security a top priority since seizing power in a 2014 coup.
“The recent bombs should be a one-time event and disappear,” NESDB Secretary-General Porametee Vimolsiri said Monday at a media briefing. “We expect the government to keep the situation under control. We don’t count this as a risk factor for the second half. Tourists have started to return to affected areas and things are getting back to normal.”
The baht gained 0.2 percent to 34.712 against the dollar as of 11:47 a.m. in Bangkok. The benchmark SET Index of stocks fell 0.1 percent after a slide in tourism-related companies including Airports of Thailand Pcl and Minor International Pcl.
The NESDB said GDP growth this year will be toward the upper end of its range of 3.0 percent to 3.5 percent, with tourism and government spending likely to be the key drivers in the second half. The economic forecasting unit raised its estimate for tourist arrivals to 33.5 million this year, from an earlier estimate of 33 million.
“Looking past the supports of tourist-related spending and fiscal stimulus, we continue to see a fragile base for activity in the Thai economy,” Benjamin Shatil, an analyst at JPMorgan Chase & Co. in Singapore, wrote Monday in a client note. “This points to the possibility of further monetary easing from the central bank if activity softens more noticeably into the second half.”
Prime Minister Prayuth Chan-Ocha has issued a series of economic stimulus measures valued at more than $18 billion since September last year to help support local demand. Fiscal spending from April through June jumped 18 percent from the same period last year to 650 billion baht ($18.7 billion), accelerating from 8.7 percent in the previous three months, according to the central bank.
The NESDB expects the government will disburse a further 110.5 billion baht of stimulus funds in the second half, after handing out 217 billion baht in the first six months. The economy is also expected to get a boost from a recovery in domestic spending, after farm incomes expanded for the first time in 10 quarters in the second quarter, according to the NESDB.
That may help offset weaker demand for Thailand’s exports, which contracted 3.1 percent in the second quarter. Tourist arrivals rose 8.2 percent from the same period last year to 7.55 million, according to the central bank.