Thailand Q1 GDP surprisingly resilient, but export slump a risk

But with exports expected to shrink for a fourth year running and consumption crimped by high household debts and the worst drought in a decade, economists say the junta may have to inject more fiscal stimulus to prevent economic momentum stalling.

Southeast Asia's second-largest economy grew 0.9 percent in January-March from the previous quarter on a seasonally-adjusted basis, up from 0.8 in the final quarter of 2015 and the 0.6 percent expected in a Reuters poll.

On an annual basis, growth was 3.2 percent, the highest in 12 quarters, the National Economic and Social Development Board (NESDB) said on Monday. That was faster than the poll's 2.8 percent and October-December's 2.8 percent growth.

The Thai economy has yet to mount a firm recovery two years after the military ended months of political unrest with a coup. The two main drivers of growth - exports and domestic demand - remain weak.

"Thailand's economy got off to a solid start to 2016, but high household debt and continued political uncertainty are likely to drag down growth again over the coming quarters," said Krystal Tan, economist at Capital Economics based in Singapore.

"Looking ahead, we expect growth to be supported by fiscal spending," she said.

The NESDB cut its 2016 estimate for exports to a 1.7 percent contraction from a 1.2 percent rise it had predicted. Exports, worth about two-thirds of GDP, fell the past three years due to tepid global demand and China's slowdown.

Bank of Thailand (BoT) Governor Veerathai Santiprabhob expects the economic recovery to be gradual and uneven, and last week cited risk from drought.

The upside surprise in the GDP data will allow the central bank to stay on hold for a while longer but it could act later if growth falters, economists say.

"With likely subtrend growth momentum and baht outperforming regional currencies, we do not think one can rule out another rate cut by the BoT later this year," said Santitarn Sathirathai, senior economist at Credit Suisse in Singapore, adding the sustainability of the momentum is still in question.

The NESDB revised its 2016 economic growth forecast to 3.0-3.5 percent from 2.8-3.8 percent seen earlier. Growth last year was 2.8 percent.

In a bid to lift economic activity, it has ramped up investment and launched various stimulus measures to boost spending, although big infrastructure projects have been slow to get underway.