Thailand's recovery is set to lose momentum in the coming quarters, after recording strong growth in the first quarter, and the central bank is likely to slash interest rate by 25 basis points later this year, Capital Economics Asia Economist Sukhy Ubhi said in a note Monday.
The country's growth will inevitably slow sharply during the reminder of the year with the escalation of the euro-zone debt crisis holding back its exports, the economist said.
Capital Economics expects the Thai economy to expand 5.5 percent this year. Public investment will remain strong as the government is seeking to improve infrastructure, especially with regards to water management and flood defense. Meanwhile, exports, the largest contributor to the first quarter growth after investments, is set to grow at a slower rate.
According to the firm, downside risks, including the political deadlock in Greece and local political risks, have increased in recent months, weighing down on prospects for Thailand's export-based economy. Meanwhile, price pressures are likely to be subdued by falling global commodity prices during the year, it said.
Data from the statistical office today showed that Thailand's gross domestic product climbed 11 percent sequentially in the first quarter, recovering from the 10.8 percent contraction recorded in the fourth quarter, which was hit by widespread floods.
Contributing the most to the GDP Growth, investments jumped 13.9 percent quarter-over-quarter, after falling 7.4 percent in the previous quarter. Exports increased 11.6 percent, while household spending advanced by 6.5 percent.
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