BANGKOK -- Thailand's economy expanded at its slowest pace since 2014 in the three months ending in June, as the U.S.-China trade war and strong baht adversely affected Southeast Asia's second-largest economy.
The government on Monday said gross domestic product for the quarter grew at a pace of 2.3% compared with the same three-month period a year earlier, and from an annual growth rate of 2.8% in the quarter ending March. That was the slowest rate since the third quarter of 2014, when the economy expanded 1.1%.
The weakness was a result from a slowdown in exports, which normally contributes more than 40% to Thailand's GDP. The government said Thailand's exports of goods declined 4.2% in the second quarter, and it expects to contract 1.2% for the year.
Thailand's governmental economic planning agency, the Office of the National Economic and Social Development Council, also revised down its economic growth forecast for 2019, predicting that GDP will grow by 2.7% to 3.2% for the full year. It had previously forecast 3.3% to 3.8%.
The Thai economy is heavily export-dependent as it functions as an important link in the global supply chain, especially for automobiles and electronics. The disrupted flow of goods due to the trade war has hurt Thailand.
A strong baht dampened the country's export competitiveness. Major central banks' dovish policy stances have created a short-term investment inflow to the currency, favoring its large current account surplus.
The flagging economy may pose a challenge to the Thai government's proposal in putting through a minimum wage hike, one of the most important pledges it made to the country's voters leading up to the general election in March. Labor Minister Chatumongkol Sonakul said it would be very difficult to implement a wage increase amid a weak economy, according to Bloomberg.
In Thailand, a minimum wage hike is not only a measure to give domestic consumption a boost, but it is also a step to bring political stability to the country by filling a wide wealth gap between the rich and the poor. The Credit Suisse Global Wealth Report for 2018 placed Thailand as the world's most unequal country in terms of wealth. But an increase in the minimum wage could hurt companies under tough economic conditions.
The Thai government is hoping to boost the economy with a large stimulus plan that it announced on Friday. The plan seeks to support farmers, lower-income earners, and small and medium enterprises with a package worth 316 billion baht ($10.2 billion). Finance Minister Uttama Savanayana said the package would help the economy maintain GDP growth higher than 3%.
Thailand is not the only Southeast Asian country that has recently made a downward revision to its economic forecast. Singapore slashed its annual GDP growth forecast last Tuesday to between 0% and 1%, sharply lower than 1.5% to 2.5% previously.
The Philippines earlier this month maintained its 6% to 7% growth target, even though its second-quarter growth fell to 5.5%, the slowest pace in four years. Malaysia last week said it managed to record year-on-year growth of 4.9% in the April-June quarter, higher than 4.5% in the previous quarter.