The National Economic and Social Development Board (NESDB) reported yesterday surprisingly strong 4Q02 GDP growth of 6.1%. This is further confirmation of accelerating economic growth last year from 3.9% in 1Q02 to 5.1% in 2Q02 and 5.8% in 3Q02. For the full-year 2002, Thailand's economy is estimated to have grown by 5.2%, the strongest rate of growth since the 1997 Asian economic crisis.

Strong 4Q02 economic growth was supported by both domestic and external demand – particularly a 5.9% increase in household consumption, a 7.8% increase in investment and a 12.2% increase in exports of goods and services.

The world's major economies actually slowed in 4Q02 with the US economy expanding by only 1.4%, Japan by 2.1% and Europe by 0.8%. Asia economies, outside of Japan, continued to show strong growth, however, with Chinese economy expanding by 8.1%, South Korean 6.5% and Singaporean 3.0%.

Production

Production in 4Q02 remained strong with a growth rate of 6.1%. The agriculture sector contracted by 2.7% due to extended rainy season and flooding in most areas of the country.

The non-agriculture sector grew by 7.5%. In particular, the manufacturing sector increased production by 10.6%, driven by an 18.4% growth in the manufacture of capital goods and high technology products.

Consumption

Household consumption expenditure increased by 5.9% as a result of rising non-farm income, improving consumer confidence and lower interest rates. Government consumption, meanwhile, decreased by 1.1% due to delays in bureaucratic reform, which effectively froze disbursement for supply and ordinary expenses at the beginning of the new fiscal year.

Investment

Private investment, which accounts for 79.1% of total investment, grew by 16.8% on the back of a 19.2% increase in construction and 16.1% increase in purchases of machinery and equipment. Public investment, which represents the remaining 20.9%, contracted by 16.6% as government investment projects were temporarily put on hold as government ministries, agencies and state enterprises were restructured at the beginning of the quarter.

External sector

The export of goods and services expanded by 12.2% mainly from machinery and mechanical appliances, electrical apparatus for producing circuit boards, electrical appliance, base metal products, plastic and canned food. While the imports of goods and services also grew at a fast pace of 13.6%, especially capital goods, intermediate products and raw materials.

	2001	2002	2001				2002
			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
GDP	1.9	5.2	1.6	1.9	1.8	2.5	3.9	5.1	5.8	6.1
Demand Side (Expenditure)	2.8	5.1	1.8	4.4	3.5	1.5	4	4.6	5.4	6.4
Domestic Demand
Private Consumption Expenditure	3.7	4.7	4	4.2	3.3	3.4	3.7	3.9	5.2	5.9
Government Consumption Expenditure	2.9	0.5	3.9	8.7	3	-3.6	8.3	-1.6	-2.8	-1.1
Gross Fixed Capital Formation	0.9	6.3	-3.9	5.9	2.5	-0.7	3.2	7.5	6.9	7.8
Net Exports
Exports of Goods and Services	-4.1	10.9	-1.9	-0.5	-8.6	-4.5	5.1	12.2	13.8	12.2
Imports of Goods and Services	-5.5	11.3	-0.4	-4.1	-10.1	-6.9	1.8	13.3	16.6	13.6
Supply Side (Production)	1.9	5.2	1.6	1.9	1.8	2.5	3.9	5.1	5.8	6.1
Agriculture	3.3	0	2.4	1.7	0.5	6.8	2.6	0.7	0.2	-2.7
Non-Agriculture	1.8	5.8	1.5	1.9	1.9	1.9	4	5.6	6.2	7.5

Source : Office of the National Economic and Social Development Board (NESDB).

NESDB revises up 2003 forecast to 4-5%

The NESDB revised up its GDP growth forecast for this year to 4-5% from the previous estimate of 3.5-4.5%. The NESDB identified the following factors driving 2003 economic growth: 1) low interest rates stimulating expenditure and investment; 2) further strengthening of consumer and business confidence; 3) an expected improvement in agriculture commodity prices; and, 4) a significant recovery of the economies within the region, supporting continuing growth in Thai exports.

There are obvious risk factors, as well, including the US-Iraq conflict. If this conflict is prolonged its will have an impact on Thailand's economy through slowing down the world economy and Thailand's export potential, affect the tourism market, deteriorate investor and consumer confidence and likely keep oil prices high. We believe that the NESDB's GDP growth forecast assumes the resolution of the crisis in the first half of this year.

In January, the BOT was forecasting a more conservative 2003 GDP growth projection of 3.5-4.5%, while the MOF took a much more optimistic forecast of 4.6-5.7% last month.

	1999	2000	2001	2002	2003F
GDP (at current prices: Billion baht)	4,637.10	4,916.50	5,123.40	5,430.50	5,799.70
GDP growth rate (at constant prices, %)	4.4	4.6	1.9	5.2	4.0-5.0
Investment	-3.2	5.3	0.9	6.3	8.3
Private	-3.3	16.8	4.7	13.3	11
Public	-3.1	-9.7	-5.5	-6.8	2.1
Consumption	4.1	4.5	3.6	4.1	4.7
Private	4.3	4.9	3.7	4.7	5
Public	3.1	2.6	2.9	0.5	2.5
Export (Bil. US dollar)	56.8	67.9	63.2	66.9	72.6
Growth rate (%)	7.4	19.5	-6.9	5.7	8.5
Import (Bil. US dollar)	47.5	62.4	60.7	63.4	69.3
Growth rate (%)	16.9	31.3	-2.8	4.6	9.2
Trade balance (Bil. US dollar)	9.3	5.5	2.5	3.5	3.3
Current account balance (Bil. US dollar)	12.4	9.3	6.2	7.6	6.6
Current account to GDP (%)	10.1	7.6	5.4	6	4.9
Inflation (%)
CPI	0.3	1.5	1.6	0.7	1.6
GDP Deflator	-4	1.3	2.2	0.7	1.8

Source: Office of the National Economic and Social Development Board, 17 March 2003