Thailand Q2 GDP posted 0.4% q/q sa growth was as expected. On a y/y basis, growth moderated to 2.8%, down from 3.0% in Q1. Growth remains disappointingly sluggish in Thailand, with tourism and a modest fiscal bounce the only growth drivers; exports have continued to underperform expectations, and domestic demand remains weighed by weak consumer and business confidence.



According to Barclays, "While we continue to expect a modest pickup in domestic demand in H2, the drag from agriculture due to the recent severe drought is likely to weigh on the recovery in our view. As a result, we lower our growth forecasts by 1.0pp to 2.7% for 2015, and by 70bp to 3.8% for 2016."

While the monetary policy stance remains highly accommodative, analysts believe the BoT remains ready to deploy further policy easing to support sentiment, if needed. This has been reiterated by the BoT through the year, and given low commodity prices and negative inflation.

Barclays says, "The risk of a rate cut in Q4 after the US Fed meeting in September remains elevated. While we maintain our base case for the BoT to remain on hold this year, any reversal in THB weakness or further deterioration in the growth outlook in 2H could be triggers for rate cuts."