Thailand Economy Recovers from Devastating Floods

The economy in Thailand has rebounded following the destructive floods of 2011. One of the worst monsoon seasons in decades killed hundreds of people, caused billions of dollars in property damage, and shut down much of the nation’s manufacturing capabilities. The floods were very harmful to the economy, however, the nation has recovered dramatically and is in a very good position for continued growth.

Gross domestic product in the nation grew 11% for the first quarter of 2011, compared to the previous three months. The strength of the figures surprised economists and beat economic recovery expectations. This is a great sign for the economy that has struggled recently. An increase in investment spending due to reconstruction efforts and a sharp jump in inventories have contributed to the growth. Domestic consumption and consumer confidence have also revived since the floodwaters have subsided. Experts believe that government assistance policies will continue to boost domestic demand, especially in the auto and electronics industries. They also believe that exports will pick up in the second quarter as more companies recover from the floods (25% of affected plants are still not fully-operational). Our Market Potential Index ranked Thailand as the having the 18th best market potential of all emerging market economies.

On an annual basis, the Thailand economy only grew .3% after shrinking 8.9% the prior quarter. Many of the major producers had to suspend production while their factories were overrun by the flood waters. Inventory levels in Thailand were also greatly affected as the flooding destroyed many products and battered industrial zones at the heart of the economy. These were the worst floods in over 70 years for the second largest economy in Southeast Asia. Weak European demand continues to be a risk for the country where exports make up nearly half of its GDP.

The National Economic and Social Development Board (NESDB) now expects growth to be between 5.5% and 6.5% for 2012. In addition, the monetary authority is going to refrain from further rate cuts, as the pace of recovery has exceeded expectations. The nation should not have a problem achieving this impressive rate of economic growth if it continues to recover at such a rapid pace. For more information on the economy of Thailand, visit here.