Thailand economy shrinks 9% on flood impact


Thailand’s economy contracted sharply in the fourth quarter of last year after the kingdom’s worst floods in half a century pummelled manufacturing, official figures released on Monday showed.

Gross domestic product (GDP) declined by 9 percent in the last three months of 2011 compared to a year earlier, the National Economic and Social Development Board (NESDB) said Monday.

GDP shrank 10.7 percent in October-December from the previous quarter – the sharpest drop in a single quarter since comparable records began in 1993, according to Apichai Thamsermsukh, a NESDB official quoted by the Agence France Presse.

Overall, south-east Asia’s second-largest economy grew by just 0.1 percent in 2011. Severe flooding in Thailand during the monsoon season killed more than 700 people, inundated two-thirds of the country, and hurt exports already dented by weaker demand in Europe, Bloomberg reported.

More from GlobalPost: Tech world still shudders after Thai floods

Major companies like Honda, Sony and Western Digital who manufacture in Thailand saw exports hit when industrial estates were flooded. Honda, Toshiba and Fujitsu have all cut their profit forecasts due to heavy disruption caused to production lines, according to the BBC.

The country’s tourism-related industries were also badly affected. However, private sector economists have said that a solid recovery is already underway, according to The Financial Times.

Thai Prime Minister Yingluck Shinawatra has pledged to spend $11 billion on infrastructure, while the Bank of Thailand cut its benchmark interest rate for the second time last month.

The country’s Ministry of Commerce is targeting a 15 percent increase in exports in 2012, compared to a 17.2 percent rise last year, although analysts have warned that shrinking global demand will weigh on exports.

Expecting a rise in both public and private spending, the NESDB has raised its forecast for 2012, anticipating that the economy will expand by between 5.5 percent and 6.5 percent this year, rather than the 4.5 to 5.5 percent it forecast in November. 

More from GlobalPost: Thai floods set to cost Lloyd's $2.2 billion, 3rd-biggest loss ever

Sign up for our daily newsletter

Sign up for The Top of the World, delivered to your inbox every weekday morning.