Thailand economy set for strong growth in 2011

Thailand's economy emerged from a brief recessionary spell in the fourth quarter, recording 1.2 percent growth in gross domestic product.

Southeast Asia’s second largest economy, which had slumped into a technical recession last year on the back of setbacks in the exports sector as well as continued political unrest, is poised to record strong growth this year, according to analysts.

Growth is likely to pick up during the course of this year, led by strengthening domestic demand and exports to the rest of Asia, according to Sukhy Ubhi, Asia economist at Capital Economics.

The expansion in the fourth quarter was propelled by a surge in exports and a rise in household spending and government expenditure, Ubhi pointed out in a note.

With import growth holding steady, the turnaround in exports meant that net trade alone added around 2.2 percentage points to q/q growth, Ubhi said.

Though the state planning agency, which compiles the GDP data, has kept its 2011 economic growth forecast of between 3.5 and 4.5 percent, there are many things going for Thai economy, according to the analyst.

Primarily, the pick-up in foreign shipments and a continued growth in domestic demand will help the economy post strong growth.

January trade figures, which were also released today, show that exports started off the year well while company order books are in good shape. More generally, the business sentiment indicator has been climbing for several months and is at a high level, in part because worries over the global outlook have diminished in recent months, the analyst noted.

Overall, we expect GDP growth to pick up in coming quarters. We forecast the economy will expand by 4% this year and 5% in 2012...

However, the analyst points out that one key risk to the economy is the possibility that the upcoming elections could bring another bout of severe social unrest.

Ubhi also says the Bank of Thailand is likely to hike its repo rate by 25 basis points for the third consecutive meeting in March, to 2.5 percent, with further tightening to 3 percent by the third quarter.