By Sean Geary
Data released over the weekend indicate that the Thai economy (THD) is better-positioned than many economists had expected.
The Thai economy is well-positioned to take advantage of a return to global growth, although it slowed down in the third quarter, quarter-over-quarter, to grow at 1.2%. While under normal circumstances such a growth rate in an emerging economy is nothing to be excited about, these numbers are substantially higher than the prognostications of observers, who predicted the economy to grow only 0.9%.
While 1.2% growth is rather weak for an ASEAN economy, the Thai economy’s third quarter growth appears to be an anomaly. As a result of the devastating flooding in Thailand last year, the Thai government implemented large-scale spending measures to repair damaged infrastructure. The concomitant boost in domestic expenditures resulted in a significant jump in Thai GDP growth. However, the large increase in government spending has tailed off as projects are completed, which rendered third quarter comps difficult.
Further, the second half slowdown in the global economy has created an adverse operating environment for export-based economies. As developed economies faltered and Western currencies became increasingly weaker, the technology exports upon which the Thai economy relies have faltered.
However, with green shoots appearing in the Chinese and U.S. economies, exports, and, in turn, the Thai economy as a whole, are well-positioned to benefit. Economists are already forecasting the Thai economy to grow 3.0% next quarter and total growth of 5.5% for the year 2012. If the global economy is able to find its footing by resolving America’s fiscal cliff and Europe’s debt woes, growth in the Thai economy would likely accelerate.
Unlike a number of developed and emerging economies, Thai equities have performed relatively well in the past month. While the S&P 500 (SPY) has dropped 6.5% in the past month, the Thai exchange traded fund has only dropped 2.5%. The THD is only a few percentage points below its 52-week high. If the ETF can break through its 52-week high, the THD could potentially go much higher.