Thailand’s risk score improves as economy surpasses growth-forecast estimates


Matthew Turner
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A combination of strong domestic consumption, a boost in government expenditure and higher rates of investment in the manufacturing sector – after last year’s severe flooding – has led to Thailand’s economy growing by a rate of 4.2% for the second quarter of 2012.

Thailand has surpassed growth forecasts between April and August 2012, leaving its risk outlook in an overall better position since the beginning of the year.

Thailand’s growth figures for the second quarter were 2.5% higher than the estimated level and followed on from a revised record 10.8% expansion in the first quarter, after economic activity picked up strongly from last year’s heavy floods.

The country’s manufacturing sector has contributed well to Thailand’s economic rebound, growing by 2.7% in the second quarter in contrast to a 4.3% contraction in the preceding quarter, figures from the National Economic and Social Development Board indicate.

These developments have resulted in Thailand’s ECR score improving by one point since March 2012 to 57.7 in August. This follows on from a 1.7 score increase since January 2012.

 Source: ECR

Thailand’s score improvement is the opposite to the Asian score average, which fell by 0.2 points between March and August 2012, continuing on from a further 0.2 decrease from January 2012.

Improvements across all of ECR’s three main assessment factors (economic, political and structural) are to account for the gains recorded in Thailand’s overall ECR score.

Thailand’s economic-assessment score increased the most, by 1.3 points from March 2012. This shows the country’s economic assessment compares favourably to its political and structural factors, which increased by 0.4 and 0.7 respectively, suggesting that Thailand’s improved ECR score is due to an improved economic environment rather than a more stable political landscape.

Thailand’s economic-outlook indicator has improved the most out of all sub-factors used in the survey. ECR contributors have increased their scores for the country’s economic-outlook indicator by 0.4 points from March 2012, to 6.1, reflecting the improved growth forecasts Thailand recorded over the second half of 2012.

Thailand’s economy expanded an annual 4.2% in the second quarter of 2012, up from just 0.4% in the first three months of the year, according to figures revealed by the Financial Times. This leaves Thailand’s economic-outlook indicator roughly on par with other advanced economies in the region and positioning it 0.9 points above the Asian average. 

Source: ECR 

Strong domestic consumption and investment have offset falls in the country’s exports. “Growth in the second quarter has been driven by a combination of strong domestic consumption and investment in the public and private sectors,” according to Nuchjarin Panarode, an economist at Nomura.

“If you decompose the growth of 4.2% into domestic and external factors, net exports contracted by 4.2 % but the domestic sector expanded 8.6%, where 5.7% is from domestic consumption and investment, and 2.8% is from the inventory increase,” she says.

This article was originally published by Euromoney Country Risk.