Thailand’s economy contracted at a slower pace in the first quarter, driven by the rebound in domestic investment and continuing growth in government spending.

Gross domestic product fell 2.6 percent year-on-year in the first quarter, following a 4.2 percent decrease in the fourth quarter, data published by the National Economic and Social Development Council, or NESDB, showed on Monday. Economists had forecast an annual decline of 3.3 percent.

On a quarterly basis, growth eased sharply to 0.2 percent from 1.1 percent in the preceding quarter. However, the rate was better than the economists’ forecast of -0.8 percent.

The agency downgraded its economic growth projection for the full-year 2021 to 1.5 percent-2.5 percent from a previous forecast of 2.5 percent-3.5 percent.

Amid a renewed outbreak of the virus, economic output is unlikely to hold up this quarter, Gareth Leather, an economist at Capital Economics, said. The economy is expected to shrink sharply as a further surge in infection pushes the country back into lockdown.

The production-side breakdown showed that farm production expanded 1.9 percent annually in the first quarter, following a 0.4 percent rise in the fourth quarter. At the same time, the fall in non-agricultural production slowed to 3 percent from 4.7 percent.

On the expenditure-side, private final consumption expenditure dropped 0.5 percent annually as the new wave of the Covid-19 pandemic at the end of 2020 affected spending adversely.

Government spending grew 2.1 percent versus a 2.2 percent rise in the preceding quarter. Gross fixed capital formation increased 7.3 percent, rebounding from a fall of 2.5 percent.

Imports of goods and services grew by 1.7 percent, whereas exports dropped 10.5 percent.

The goods and services balance recorded a deficit of THB 30.1 billion, comprising a surplus of THB 224.3 billion in trade balance and a deficit of THB 254.4 billion in service balance.

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