BANGKOK - THAILAND'S economic growth slowed to a seasonally adjusted 0.6 per cent in the third quarter, the lowest in three-and-a-half years, due to sluggish investment and weakening exports in the face of the global financial crisis.

Analysts said the slowdown could bring a relatively big rate cut of half a point at a central bank policy review on Dec 3.

The state economic planning agency cut its full-year growth forecast to 4.5 per cent, a seven-year low and down from the 5.2-5.7 per cent predicted in August due to the impact of the economic slowdown in Thailand's major export markets. 'We see fourth-quarter growth falling further due to a slowdown in exports,' economist Nuchjarin Panarode of Capital Nomura Securities said after the data came out on Monday.

The 0.6 per cent growth in gross domestic product (GDP) in the third quarter, the weakest since the first quarter of 2005, was above the 0.3 per cent forecast by analysts in a Reuters poll.

Second quarter growth was revised to 0.8 per cent from 0.7 per cent.

The negative effects of the global credit crisis have been compounded by political unrest at home, with thousands of anti-government protesters forcing a parliamentary session to be postponed on Monday.

'Going forward, we expect the economy to slow down at a faster pace due to ongoing political instability and decelerating export growth,' economist Usara Wilaipich of Standard Chartered Bank said.

'This prospect should warrant rapid action from the central bank, expected to cut rates by at least 25 basis points at the next MPC meeting. If so, we believe this will be the start of a downward cycle in interest rates,' she said, referring to the central bank's Monetary Policy Committee.

Trade gloom
Japan, Hong Kong and Singapore have fallen into recession as the impact of the global credit crunch spreads through Asia.

Compared with a year before, when economic activity was depressed after a military coup in September 2006, GDP grew 4.0 per cent in the third quarter, below the 4.3 per cent forecast and well below the 5.3 per cent in the second quarter.

Soaring oil import costs in the third quarter wiped out Thailand's normally positive net export position. Trade was neutral for the economy in the quarter, after a 2.4 percentage point contribution to growth from net exports in the second quarter from a year earlier, the agency said.

The National Economic and Social Development Board (NESDB) expected inflation of 5.6 per cent in 2008, down from its previous forecast of 6.5-7.0 per cent, due to a collapse in oil prices.

The planning agency raised its growth forecast for both exports and imports for 2008, but the effect of that would be a US$1.0 billion (S$1.5 billion) trade deficit rather than the US$3.6 billion surplus forecast three months ago.

Oil-inflated imports rose in the third quarter by 39.1 per cent from a year earlier, outpacing a 25.5 per cent rise in exports, according to central bank data.

Oil imports surged 60 per cent in dollar terms in the third quarter after jumping 59 per cent in the first half, it said.

To beef up consumption, the government has announced a series of stimulus packages, including higher petrol price subsidies, and free public transport and lower utility charges for the poor. It has also pledged to accelerate infrastructure projects.

The economy grew 4.9 per cent in 2007. Private sector economists polled by Reuters last week forecast growth of 4.6 per cent in 2008 and 3.1 per cent in 2009. -- REUTERS