Thai economy shrinks in fourth quarter Thailand's economy took a larger than expected hit from the impact of severe floods in the second half of last year, contracting at an annual rate of 9 per cent in the fourth quarter to give overall growth of just 0.1 per cent in 2011, according to official figures on Monday. The contraction - Thailand's first since 2009 - exceeded most unofficial estimates of a 4-5 per cent decline in the quarter, although private economists played down the figures, noting the economy was already in a "V-shaped recovery mode." The country's manufacturing and tourism-related industries were the most affected, shrinking in the fourth quarter by 23 per cent and 8.5 per cent respectively from the previous quarter, according to the government's National Economic and Social Development Board. By expenditure, net exports saw the sharpest decline, falling an annual 6.1 per cent because of the disruption of industrial activity, followed by private consumption and investment, which all experienced larger than expected declines. In the previous quarter, net exports grew an annual 17.3 per cent. Flood damage costs have been estimated at up to $15bn, affecting more than 400 large manufacturers, mainly Japanese companies as well as top US hard-drive maker Western Digital. Private sector economists said, however, that a solid recovery was already under way, noting the government's recent commitment to spend at least $11bn on flood recovery efforts. They also cited a likely boost to capital imports of an estimated $10bn to $15bn in insurance pay-outs in the coming months. "A V-shaped recovery is already in place," noted Sin Beng Ong, economist at JPMorgan in Singapore. Despite the worse than expected outcome in the 2011 fourth quarter, the high-frequency data suggests that output had not only stabilised but was already marking a solid recovery in December. For 2012, most private economists stuck by earlier forecasts that were similar to the Bank of Thailand's prediction of 4.9 per cent growth for the year. The NESDB, however, raised its growth forecast to 5.5-6.5 per cent for 2012, compared with a previous estimate of 4.5-5.5 per cent. JPMorgan has forecast 5.2 per cent growth, while Rahul Bajoria, economist at Barclays Capital, has pointed to 4.5 per cent growth for 2012. "Private consumption and public investment will support growth in the first half of the year - we are already seeing an improvement in consumer confidence and rising government support [for flood defence efforts]," he said. Mr Bajoria noted that exports and private investment would only start to rebound from the second half, however. Relief and reconstruction efforts in the manufacturing sector seem to be ongoing, but slowly - we expect a return to full capacity, external demand permitting, by the third quarter. Some economists say there is room for the central bank to cut interest rates further at its March meeting from the current 3 per cent, after quarter-point cuts in December and January. Others say, however, that the bank's "exceptional" cycle of rate-cutting has ended. Usara Wilaipich, economist at Standard Chartered Bank in Bangkok, said the Thai central bank was likely to adopt a "wait and see approach." The Thai baht, which has remained relatively resilient despite the flood crisis, was stable on Monday, rising to Bt 30.76 against the dollar. However, Suchart Techaposai of Citicorp Securities in Thailand, said the worse than anticipated decline in growth "suggests a deeper hole to climb out of, that may require sustained stimulus." The negative output gap would "probably facilitate a faster pace of core disinflation for the remainder of the 2012 first-half," which he predicted would most likely prompt another rate cut in March.