Strong domestic activity drives growth and exports pick up
The economy expanded much more than expected in Q4 2012, with seasonally adjusted GDP rising by 3.6% on the quarter. Consumption gathered further pace, helped by high confidence and wage growth, and low unemployment. Stock building also increased sharply. As a result, we expect a relatively flat start to 2013 before an export-led acceleration through the year.
Strong expansion in the electronics and automotive sectors led to robust export growth in Q4 2012. This bodes well for 2013. These sectors represent the two largest export industries by value. Recent improvements in the global economy and in emerging Asian trade should support export growth this year.
The decision to keep monetary policy very accommodating reflects lingering concerns about the state of the global recovery. However, we now see these risks as much more balanced than a few months ago. And with consumer spending set to stay robust as household incomes rise, we think that the central bank will need to tighten policy in H2 2013 to prevent the building of inflationary pressures.
Robust domestic activity, combined with stronger export demand, should enable the economy to grow by more than 5.0% in the medium term.
Exports and imports
Source: Customs Department; Haver Analytics
Private investment indicator
Source: Bank of Thailand; Haver Analytics
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