Thailand's 2013 GDP forecast plunged to 2.8%

But analyst predicts recovery next year.

According to UBS, following the quarterly contraction in seas. adj. Q2 GDP, it revises its 2013 real GDP growth forecast to 2.8% (previously 4.0%).

Here's more:

Our 2014 real GDP forecast is unchanged at 4.5%. This compares to revised NESDB 2013 forecasts of 3.8-4.3% from 4.2-5.2%. High frequency indicators suggest positive sequential growth in H2 but less momentum than we initially assumed.

Looking into 2014, UBS' forecast pickup in US and European growth implies modest export upside, while weak growth in H1 should induce more stimulus from the government if not the central bank.

The BoT left policy rates unchanged on 21 August, arguing that growth would return in H2 and that policy was loose enough. We agree and look for no further policy rate change this year.

We made the case in Thailand: Is there room for stimulus? that simultaneous BoT and government stimulusrisks enflaming the current account deficit.

Thai real GDP contracted 0.3% qoq seasonally adjusted in Q2.

On the year growth slowed to 2.8% yoy from 5.4%. This was broadly in line with the high frequency indicators we highlighted in Thailand by the Numbers, but below most standing forecasts including our own. Quarterly growth in Q1 was revised higher (to -1.7% from -2.2%) but not as much as we hoped.