Thailand's economy continues to improve despite headwinds

Its GDP grew 3.2% in 3Q.

Thailand’s economy remains on a recovery path despite greater downside risks on both domestic and external fronts, said UOB.

The 3Q16 GDP growth rose to 3.2% y/y versus 3.5% y/y in the previous quarter. In seasonally adjusted terms, 3Q16 GDP expanded by 0.6%. The nine-month period of 2016 grew by 3.3%.

UOB notes that the economic momentum was driven by public spending on transportation and irrigation projects and a steady growth in private consumption.

Moreover, exports started to pick up and tourism continued to grow despite the bombing incidents and the government’s regulation on zero-dollar tour operators.

The research house however cautioned that private investment still contracted as import of capital goods remained low and the construction sector slowed down in line with the decelerating real estate sector.

Looking ahead, UOB expects Thailand’s economy to continue to improve at a gradual pace.

"Public expenditure and tourism remains significant growth drivers. The Finance Ministry currently seeks fresh stimulus measures to offset the slowdown in activity during the mourning period and ward off downside risk in 4Q16," it said.

In terms of monetary policy implications, it expects the BoT to keep the policy rate unchanged at 1.50% in its 21 Dec meeting as current monetary conditions remain accommodative and conducive to the economic recovery.