Despite promising GDP growth in the second quarter, Thailand's economic recovery remains uneven because exports and tourism have reaped the greatest benefits, leaving other sectors in the lurch, says Kasikorn Securities.
While healthy figures were logged for exports and tourism in the second quarter, private consumption of non-durable goods did not expand and consumption of durable goods was the main contributor for private consumption growth in the first six months, said senior vice-president Kampon Adireksombat.
Although private investment rebounded considerably between April and June, that reality was not reflected in the Bank of Thailand's lacklustre business sentiment index, while the manufacturing production index and the capacity utilisation rate remained tepid, he said.
Private consumption expanded by 3% year-on-year in the second quarter, down from 3.2% in the previous quarter, according to the National Economic and Social Development Board (NESDB).
Private consumption rose by 3.1% in the first half. Private investment rose by 3.2% year-on-year between April and June, up from a decline of 1.1% registered in the first three months.
Private investment grew by 1% in the first six months. On the other hand, the MPI slightly expanded by 0.1% in the first half, with capacity utilisation standing at 60.8%.
"The economy is recovering, but the recovery has not been broad-based," Mr Kampon said.
The NESDB reported on Monday that Thailand's GDP rose by 3.7% year-on-year in the April-June period after a 3.3% expansion in the first quarter.
The rise marked a 17-quarter high after 5.2% growth in the first quarter of 2013. GDP rose on a quarterly, seasonally adjusted basis by 1.3% in the second quarter, unchanged from the first three months.
For the first half, the economy grew by 3.5% year-on-year.
"Thailand's growth engine is being fuelled by small growth drivers [public investment and tourism], so the growth impetus cannot be propelled to a higher degree," Mr Kampon said. "A decent recovery in exports and private consumption would be major drivers stimulating [full-year] economic growth to reach 4%."
Exports of goods have also not experienced a broad-based recovery, as exports merely reaped the benefits of a pickup in commodity prices that occurred early this year, with electronic exports lending support to the growth momentum, Mr Kampon said.
He said other exports have not experienced a decent recovery.
Thailand has not produced more rubber, but a pickup in commodity prices in the global market contributed to higher growth in commodities in the first half, Mr Kampon said.
Of the 7.8% year-on-year export expansion in the first half, rubber and rubber products accounted for 2.8% of that growth, followed by other commodities at 2.7%, electronics at 1.3%, and other exports at 1%, said Kasikorn Securities.
The house forecasts Thailand's GDP growth at 3.5% this year, with exports of goods projected to expand by 3.8%.
But Standard Chartered Bank Thai economist Tim Leelahaphan offered a different perspective, saying economic growth in the first half was broad-based, given how GDP growth in the second quarter continued to improve from that of the first quarter.
"We believe that the better-than-expected macro numbers and political progress made towards next year's general elections will trigger capital flows into Thailand later this year," Mr Tim said.
Although reviving private investment is challenging amid excess capacity, businesses should become more active after other economic indicators improve, he said.
"The military government's push to implement big-ticket projects before leaving office should also stimulate private investment," Mr Tim said.
