BANGKOK, May 20 (Reuters) - Thailand's economy shrank 2.2 percent in the first three months of 2013 from the previous quarter and economists said that would add to government pressure for a rate cut to hold down the baht, even though the finance minister is happy the currency has fallen back recently.
The state agency that compiles the data revised down its forecasts for both exports and GDP growth this year, and also said inflation may be lower than it anticipated.
All that will add to the case for a rate cut, although GDP growth in the forecast 4.2 to 5.2 percent range would be broadly in line with the economy's capacity and the Bank of Thailand is worried about credit growth and high household debt.
A Reuters poll of economists had forecast a quarter-on-quarter contraction of only 0.8 percent.
The baht was steady after the data at around 29.88/90 per dollar. It touched 28.55 last month
Q1 GDP q/q SA -2.2 pct (vs -0.8 pct in Reuters poll)
Q1 GDP y/y +5.3 pct (vs +5.7 pct in Reuters poll)
For a graphic: http://link.reuters.com/vab36s
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SACHA TIHANYI, SENIOR CURRENCY STRATEGIST, SCOTIABANK, HONG KONG
'I remain bearish on the baht. The weaker than expected GDP print will provide the government with fuel in its efforts to convince the Bank of Thailand of its view that the country requires easier monetary conditions.'
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USARA WILAIPICH, SENIOR ECONOMIST, STANDARD CHARTERED BANK
'The first quarter GDP result confirmed that currency appreciation appeared to have a greater adverse impact on the export sector, and could threaten the economic recovery going forward.
'The below-consensus first quarter GDP result, together with rising concerns about the negative impact of Thai baht appreciation on exports in the second quarter, will influence the MPC to pre-emptively manage downside risks to growth.
'This backdrop should support our long-held call for a 25 basis point cut in rates at the next MPC meeting on May 29.'
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For details, see NESDB website:
For Reuters poll
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- Southeast Asia's second-largest economy expanded a faster-than-expected 6.4 percent in 2012 after a scant 0.1 percent in 2011 due to devastating floods in the final months of that year.
- Domestic demand has moderated after the surge that followed the floods, but it continues to be the main driver of growth as global problems and a strong baht have hurt exports.
- The Bank of Thailand (BOT) has forecast economic growth of 5.1 percent this year and export growth of 7.5 percent.
- The BOT's monetary policy committee (MPC) has left the benchmark interest rate at 2.75 percent since October, resisting government pressure to cut it.
- Finance Minister Kittirat Na Ranong has called for a cut in the policy rate, saying it is too high and has drawn capital inflows that pushed up the baht to a 16-year high in April, possibly depressing exports.
- Until recently, economists had not expected any change in the rate this month and most still don't see much of a case for it, but some say the chances of a cut have grown because of the government pressure. The next rate meeting is on May 29.
(Reporting by Bangkok Newsroom; Editing by Alan Raybould) Keywords: THAILAND ECONOMY/GDP
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