Thailand's economic growth accelerated in the fourth quarter on rising exports and local demand, reducing pressure on the central bank for further interest-rate cuts.
Gross domestic product increased 18.9% in the three months through December from a year earlier, after expanding a revised 3.1% in the previous quarter, the National Economic and Social Development Board (NESDB) said in Bangkok on Monday. The median of 14 estimates in a Bloomberg News survey was 15.3%. The economy grew 6.4% in 2012 from 0.1% in 2011, when a deluge swamped most of the country.
Prime Minister Yingluck Shinawatra last year raised minimum wages and unveiled incentives for car buyers and rice farmers to boost domestic demand and counter falling exports. The Bank of Thailand last month held borrowing costs for a second meeting and Governor Prasarn Trairatvorakul said he was under no pressure to lower rates even after Finance Minister Kittiratt Na-Ranong renewed calls for easing to cool the baht's gains.
"Consumption and investment should continue to grow this year," Benjarong Suwankiri, an economist at TMB Bank Plc in Bangkok, said before the data release. "Given the firm economic fundamentals, there is no reason for the central bank to ease monetary policy to stimulate the economy further," he said, adding that there is mounting political pressure for a rate cut.
The Thai baht has advanced more than 5% against the US dollar in the past six months, the biggest gainer among 11 widely-traded Asian currencies tracked by Bloomberg. It was little changed at 29.88 per dollar as of 9.34am in Bangkok. The benchmark Stock Exchange of Thailand (SET) Index reached the highest level since November 1994 last week.
Record Sales
The central bank last month raised its 2013 GDP forecast to 4.9% from an earlier prediction of 4.6%, while maintaining its projection for export growth at 9%. Overseas sales increased for a fourth month in December, and the manufacturing index climbed for a third straight month.
Thai car sales by all producers reached a record 1.44 million in 2012, Toyota Motor (Thailand) said last month, helped by a tax incentive for first-time buyers. Bank loans grew 13.7% last year as companies rebuilt businesses that were devastated by floods at the end of 2011, with Bangkok Bank, the biggest lender, reporting full-year profit rose 21%.
Economic growth surged last quarter after a slump in the corresponding period in 2011 when the worst floods in almost 70 years disrupted output by manufacturers from Western Digital Corp to Honda Motor Co.
Luring Inflows
The Thai economy is weathering an uneven global recovery better than its larger neighbor Indonesia, which expanded 6.1% last quarter, the slowest pace in more than two years. The Philippines grew 6.8%, and its central bank has said it is considering more measures to counter the impact of inflows on the peso, which has recently strengthened to a record.
Keeping rates low for a long time may lead to asset bubbles, Prasarn has said. Kittiratt, who has repeatedly urged the monetary authority to cut borrowing costs further, said earlier this month he wrote a letter to central bank Chairman Virabongsa Ramangkura, reiterating his view that the Thai rate is luring capital inflows. Prasarn last week said the interest-rate differential is not the primary reason for rising inflows.
The monetary authority will leave its one-day bond repurchase rate unchanged when policy makers meet on Feb 20, according to 13 of 15 economists in a Bloomberg survey. Two expect a 25 basis-point reduction.
Thailand's economy grew a seasonally adjusted 3.6% last quarter from the three months through September, when it expanded a revised 1.5%, the agency said on Monday.