Reuters

Bangkok

 Thailand’s economy probably expanded slightly in the third quarter after a military coup in May returned some stability to the country, but the pace of recovery will likely be slower than expected as exports and domestic demand remain sluggish.

Southeast Asia’s second-largest economy suffered virtual paralysis in policy-making from months of political unrest before the coup. Badly bruised sectors such as tourism are still struggling, while consumer spending continues to be sluggish.

“Fragile domestic demand and weak exports temper high hopes of a swift upturn in the Thai economy following the removal of political uncertainty,” said economist Bernard Aw with Forecast Pte. in Singapore.

Gross domestic product (GDP) was forecast to grow a seasonally adjusted 1.8% in July-September from the previous quarter, when it expanded 0.9% and avoided a technical recession, a Reuters poll showed. On an annual basis, the economy probably grew 1% after expanding 0.4% in April-June, the poll showed. In the first half, the economy contracted 0.1%.

When the junta seized power, it said it needed to restore order after the unrest and get the economy moving. While it has approved government spending on big infrastructure projects and other measures to create jobs and income, the benefits are not expected to trickle down until next year.

Government stimulus has helped lift sentiment, but private consumption, which makes up half of the economy, remains subdued as Thais are heavily indebted. Critics say the continued imposition of martial law has also dented confidence and is keeping visitors away.

Rumblings of uncertainty among some in the business community over the army’s ability to run the economy and concerns over the health of Thailand’s revered King Bhumibol Adulyadej, 86, who underwent surgery and remains in hospital, have also fuelled anxiety. A recent bright spot was an unexpected rise in exports for September. However, the central bank sees no export growth this year, while most economists predict a contraction.

The median forecast in the Reuters poll was for 1.3% GDP growth this year and 4% next year. But economists’ estimates for 2014 ranged from 0.2-2.5%, signalling divergent views on how the economy will pull itself out of the slump.  The planning agency, which compiles GDP data, has forecast growth of 1.5%-2.5% for 2014 and 3.5%-4.5% next year.