Thailand GDP to jump to 2.8%

But the country has to brace for waves of external demand woes with the lacklustre global economic outlook.

According to DBS, headline GDP growth is expected to reach 2.8% YoY in 2Q. This will take growth in the first half of this year to 1.5%. Our full year growth forecast of 5.5% remains unchanged for 2012. Sequentially, GDP growth will run at a healthy clip of 1.8% QoQ sa. Notably, much of the V-shape recovery since the floods of 2011 has already played out. The value of production index has been hovering near the pre-flood levels since March.

Here's more from DBS:

Meanwhile, capacity utilization remains elevated by historical standards, but we suspect that payback for the drop in production in 4Q last year will be over in the coming few months. Supply side constraints will no longer be the main determinant behind output growth. Instead, demand will become the primary determinant of economic growth.

Going forward, the lackluster global economic outlook does not bode well for external demand. Pent up demand is currently helping to drive exports for electronic manufactures and vehicles. But with final demand unlikely to recover sharply, the pace of export growth is set to slow.

The picture for agriculture exports is mixed. In the early months of this year, the quantity of rice exports fell sharply as the government implemented the price pledging scheme for rice. However, the government has already accumulated a significant stockpile of rice and it is possible that the excess grain will be exported.

Growth in the coming quarters will hinge heavily on domestic demand, in particular, investment. Private investment has rebounded sharply since the trough in December last year with imports of capital goods increasing significantly. This momentum looks likely to spill over into 3Q amid continued post-flood reconstruction.

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