Thai Economy Grows at Slowest Pace

By STEPHEN WRIGHT / AP WRITER

BANGKOK — Thailand's economy grew at its slowest pace in more than three years, taking a double hit in the third quarter from deadly political turmoil and the global financial crisis.

Gross domestic product grew 4 percent from a year earlier compared with 5.3 percent in the second quarter, the National Economic & Social Development Board said Monday. The third quarter's growth was the slowest since the first quarter of 2005, when the economy expanded just 3.6 percent in the aftermath of a tsunami that laid waste to resorts on Thailand's western coast, killing thousands.

Agricultural production continued to grow strongly but other sectors of the economy wilted. The deadly political violence deterred foreign tourists and state expenditure fell as the political crisis paralyzed the government. Construction also contracted, consumer spending remained weak and the global credit crunch blunted export growth.

"Major services sectors such as manufacturing, hotels and restaurants, transport and communications, and wholesale and retail trade showed slowdown growth due to severe effect of political turmoil and global financial crisis," the government's economic planning agency said in a report.

David Cohen, head of Asian forecasting at Action Economics in Singapore, said Thailand faces a one-in-three chance of slipping into recession in the first half of next year as the global slowdown takes an even greater toll on exports than seen in the third quarter.

Thailand is a major export base for Japanese automakers. Rice, shrimp and electrical goods are other major exports.

Growth next year will slump to about 2.5 percent from the 4.5 percent expected for this year but could be lower if the US economy doesn't pickup in the second half of 2009, Cohen said.

Cohen predicted the Bank of Thailand would cut rates at its next policy meeting on December 3.

Thailand's political tension intensified Monday, when thousands of anti-government protesters were besieging Parliament in Bangkok. The last time the group marched on Parliament, police efforts to disperse them resulted in running street battles. Two people were killed in the October 7 violence and hundreds injured.

Since May, protesters have campaigned to topple the ruling party because of its close ties with former Prime Minister Thaksin Shinawatra, who was ousted by the military in a bloodless September 2006 coup.

Construction tumbled 4.5 percent in the third quarter on the heels of a 3.4 percent contraction in the second quarter. The agency blamed a rise in the cost of raw materials and a 7.3 percent in fall state-funded construction as government spending slowed. Private construction also contracted.

The hotels and restaurants sector grew just 0.2 percent, slumping from 5.9 growth in the second quarter.

Thailand's image as an idyllic tourist destination has been tarnished by the political unrest. Thousands of travelers were stranded for several days in August after protesters overran runways at airports serving popular holiday destinations in the country's south. Tourist arrivals fell 1.7 percent in the quarter.

Growth in exports of goods eased to 9 percent from 9.8 percent in the second quarter.

The economy grew 0.6 percent from the previous quarter in seasonally adjusted terms, slowing from 0.8 percent growth in the second quarter.