Thailand posts V-shaped recovery, but policy loosening still likely

Today’s Q1 GDP data show that Thailand’s economy bounced back strongly from the flood-induced slump in Q4, as expected. Growth will inevitably slow sharply now that the easy gains have been achieved. More importantly, prospects for the rest of the year have worsened given that the escalation of the euro-zone debt crisis is likely to hold back Thailand’s exports. The upshot is that we maintain our non-consensus call that the Bank of Thailand is likely to cut its policy rate later this year.