Thailand's economy falls into recession

  • 19 August 2013
  • From the section Business
Man holding food bags
Image caption Consumer confidence has fallen

Thailand has fallen into recession after the economy shrank unexpectedly in the second quarter of the year.

The 0.3% contraction in gross domestic product between April and June followed a previous fall of 1.7% during the first quarter of 2013.

Previously, Thailand had been recording strong economic growth, outpacing other economies in the region, with expansion of more than 6% during 2012.

Many analysts had expected this performance to continue.

Sanjay Mathur, head of economics research at RBS, told the BBC that weak exports and domestic demand, plus fading business confidence, were to blame for the downturn.

"The fundamental problem here is that it's not just about exports, it is about domestic demand."

"We should be looking at growth of about 3.5%," he said. "In the early part of the year, expectations were that Thailand would be forging ahead of several Asian economies, so that has been a big disappointment."

The end of large-scale government investment projects following the devastation caused by flooding at the end of 2011 has also been cited as a cause for the fall in domestic consumption, which accounts for about half of economic output.

By the end of 2012 Thailand's growth was exceeding expectations, with gross domestic product in the October-to-December period jumping by 18.9% from a year earlier.

However, high household debt, and rising prices have continued to cause concern, and following a cut in interest rates in May, the Bank of Thailand left rates unchanged at 2.5% at its last meeting.

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