HSBC puts Thai growth at 5.5% as Asia shrugs off

She said Thailand and other Asean economies had outperformed market expectations in the first half of this year. Thai GDP expanded 4.2 per cent year on year in the second quarter.
Much of the upside surprise in Asean has come from domestic demand, which has more than offset declining contributions from exports, Lim told a news conference. She said investment growth had been especially strong.
With robust domestic demand providing a buffer against weaker external demand, the slowdown in overall economic growth in Asean is likely to be moderate, she said.
Low inflation, cheap credit and still-tight labour markets should help keep Asean investment and consumption buoyant, according to Lim.
“On inflation, the rise in crude-oil and global food prices poses upside risks to the outlook. However, we are not too worried for now – currency appreciation, adequate supplies of rice, a key staple food, and government price controls should keep the inflation outlook benign,” she said. HSBC forecasts that Thai headline inflation will be 3.4 per cent this year and edge up to 3.8 per cent next year.
Lim said credit might in fact be too cheap. Policy rates in Asia today are not much higher than during the global financial crisis. This has led to a rapid pick-up in credit growth, particularly in Asean. Consequently rate cuts from central banks will only be moderate.
Instead fiscal policy will have to do more heavy lifting in terms of policy stimulus. Fiscal deficits this year will have a tendency to widen compared with 2011. Lim expects the Bank of Thailand will keep the policy rate unchanged at 3 per cent per annum this year and may raise it to 4 per cent next year.
She expects the baht at the end of this year will be 30.90 per US dollar and strengthen to 30 by the end of next year.
She said there were some economic indicators recently suggesting an improvement in the housing sector and consumer spending in the United States.