Growth has slowed down since the secondquarter, but exceeded expectations. Considering the 1)political turmoil; 2) robust growth during the rebound; and3) slowdown in advanced economies, the Thai economy wasexpected to contract by more than it did in the second andthird quarters. The output of the manufacturing sectorexpanded in the second quarter, led by still-growing exportsand robust private consumption. Demand indeed appears tohave been higher than production, as some orders had to befilled by drawing down on inventories. However, a sharpcontraction in tourism led Gross Domestic product (GDP)overall to contract in the quarter. The FY10 fiscal deficitwas much smaller than initially feared when the budget wasproposed. The budget for FY10 was prepared at the trough ofthe global financial crisis in February 2009 and anticipatedonly 1.35 trillion baht in revenues. Inflation levels havebeen low and stable but persistent increases in food pricescould pose risks. Overall, slower growth in advancedeconomies will translate into lower GDP growth Thailand forthe next two to three years. Notwithstanding a decelerationin the second half because of the waning global inventorycycle, year-on-year growth in 2010 is expected at 7.5percent due to the low base of 2009 and the strong firsthalf. Quarter-to-quarter growth will pick up modestly in2011 to average over 4 percent, but the relatively high basein 2010 results in a year-on-year growth rate of 3.2 percentfor 2011.
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