BANGKOK - Thailand's economy shrank more than economists estimated as the worst floods in almost 70 years disrupted output from Western Digital Corp, Honda Motor Co and other manufacturers.
That put pressure on policymakers to boost the country's economic growth.
In the three months leading up to December, Thailand's GDP declined 9 percent below what it had been in the same period a year earlier. In the previous quarter, it had climbed by 3.7 percent, according to revised numbers, the National Economic and Social Development Board said in Bangkok on Monday. Last year, the economy grew 0.1 percent.
Southeast Asia's second-largest economy contracted for the first time since 2009 after floods that had killed more than 700 people and inundated two-thirds of the country hampered exports, which were already slowed by weak demand from Europe. Thai Prime Minister Yingluck Shinawatra has pledged to spend 350 billion baht ($11 billion) on infrastructure.
"Risks to growth in the first half of this year could remain on the downside," Usara Wilaipich, a Bangkok-based economist at the international bank Standard Chartered PLC and a former country economist at the World Bank, said on Monday. "We expect to see recovery in 2012 driven by domestic demand, while recovery in manufacturing and exports will take some time."
The baht gained 0.1 percent to 30.76 against the dollar at 11:20 am in Bangkok after reaching a three-month high of 30.64 earlier. The benchmark SET Index, which tracks stocks traded on the Stock Exchange of Thailand, rose by 0.4 percent.
Thailand's GDP fell by 10.7 percent last quarter from three months earlier, compared with a revised 0.8 percent rise in the previous period, the report showed on Monday.
"The economy this year will rebound strongly", boosted by private and government spending, Arkhom Termpittayapaisith, secretary-general of the economic board, told a news conference on Monday. First-quarter GDP growth will be "slightly positive", and the pace will "gain more momentum" from the second quarter onward, he said, adding that it will be possible to see 7 percent growth this year.
The board predicted the country's economy would increase by 5.5 percent to 6.5 percent this year, compared with previous estimate of 4.5 percent to 5.5 percent. In 2011, the country's economic performance lagged behind an earlier government estimate of 1.5 percent gain.
The Bank of Thailand, the central bank, said the risks posed this month by the worsening global outlook and the effects of flooding last year were greater than the threat of inflation. Weakening demand for the region's goods has prompted policymakers from Indonesia to the Philippines to cut borrowing costs and support growth.
The Bank of Thailand may consider cutting rates if inflation continues to lead to unpleasant surprises, said Wilaipich, adding she expected a "wait-and-see approach" at the next policy meeting in March.
Thailand's inflation slowed for the second consecutive month in January. While consumer confidence has increased in the country since November, political uncertainty and rising energy costs are undermining the sentiment and the economic recovery remains fragile, the University of the Thai Chamber of Commerce said on Feb 9.
In December, the country's manufacturing index fell for the fourth consecutive month and exports dropped for a second month after floods disrupted production in the country, prompting Honda, Toshiba Corp, Fujitsu Ltd and other manufacturers to reduce their profit forecasts last month. Zurich Financial Services AG said last week its fourth-quarter profit fell by 46 percent as a result of the floods and other natural disasters.
The Ministry of Commerce is seeking a 15 percent increase in exports this year, compared with a 17.2 percent gain in 2011. Overseas sales may cease their decline in January, according to a Bloomberg News survey. The data are to be released this week.
"Exports will continue to improve as plants resume production," Kampon Adireksombat, an economist at Tisco Securities Co, said before the report. "Still, we need to accept the truth that the growth this year can't be as high as two years ago because of faltering global demand."
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