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Thailand's economy grew at the fastest pace in seven quarters, exceeding economists' estimates, as exports of rice, automobiles and computer chips climbed.

Southeast Asia's second-biggest economy expanded 5.7 percent in the fourth quarter, accelerating from a revised 4.8 percent in the third quarter, the government said today in Bangkok. That was more than the median estimate of a 5.3 percent gain in a Bloomberg News survey of 12 economists.

Overseas shipments grew 24 percent, almost double the pace of the third quarter, even as the baht's rise to a decade-high made exports more expensive. The end of military rule this month may boost consumer confidence after newly elected Prime Minister Samak Sundaravej's government promised to boost budget spending and revive investment.

“The export performance looks phenomenal,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore, who expects Thailand's economy to expand 5.6 percent this year. “Worries about a strengthening Thai baht hurting exports are overdone. Growth is going to be pretty strong this year supported by pick-up in investment, consumption and exports.''

Exports, which account for about 60 percent of the economy, grew 24 percent in the fourth quarter, from 12.6 percent in the third quarter, according to central bank data. Exports totaled a record $14.6 billion in November as demand from China and eastern Europe offset waning orders from the U.S. and Japan.

U.S. Risk

Gross domestic product expanded 1.8 percent in the fourth quarter from the previous three months, when it grew 1.5 percent, seasonally adjusted. That was higher than the 1.3 percent median estimate of economists surveyed by Bloomberg.

The baht onshore held at 32.29 per dollar as of 10:50 a.m. in Bangkok, the highest since August 1997, according to data compiled by Bloomberg. The SET Index rose as much as 1.3 percent to 837.59, extending its gain over the past year to 22 percent.

The export boost may not last if the U.S., the biggest buyer of Thailand's exports, slips into a recession.

Goldman Sachs Group Inc. on Jan. 14 cut its 2008 forecast for Thailand's expansion to 4 percent from an earlier estimate of 4.5 percent due to the possibility of a U.S. recession.

That compares with the Bank of Thailand's prediction of as much as 6 percent growth.

“We expect the U.S. economy will fall into a mild recession,'' said Aksarapak Wongcharoen, an economist at Tisco Securities in Bangkok. “The negative impact of a U.S. and global slowdown on the Thai economy will be seen through weak exports beginning in the second quarter of this year.''

Consumer Spending

The U.S. bought 12.6 percent of Thailand's exports in 2007, followed by Japan's 11.9 percent and China's 9.7 percent.

Consumer spending rose 1.6 percent from a year earlier in the fourth quarter, slowing from 1.8 percent in the previous three months, today's report showed payday loans creditscore.

Thailand's economy is expected to grow between 4.5 percent and 5.5 percent this year, compared with 4.8 percent in 2007, as recovering local demand and government spending offset slowing exports, Ampon Kittiampon, secretary general of the National Economic and Social Development Board, the government's economic advisory agency, told reporters today.

The government has pledged to continue the policies of Thaksin Shinawatra, who oversaw the fastest economic growth in a decade in 2003, before being ousted as prime minister in a 2006 coup. Restrictions on foreign capital entering Thailand will be lifted to boost the economy, Prime Minister Samak said on Feb. 8.

“They are turning the page on the political front, and that should help support domestic demand, including both consumer and investment spending,'' David Cohen, economist at Action Economics in Singapore, said in an interview with Bloomberg Television.

Confidence Rising

Consumer confidence rose for a third straight month in January amid optimism the new government would spend more.

Total investment in the fourth quarter rose 4 percent, accelerating from a 2.6 percent gain in the previous quarter, today's report showed.

Manufacturing gained 8.1 percent following a 5.7 percent expansion in the previous three months. Private construction contracted 8.5 percent from growth of 0.7 percent a year earlier.

Government spending increased 16 percent, compared with the third quarter's 9.5 percent pace.

Interest Rates Outlook

The Bank of Thailand lowered its benchmark interest rate five times last year in the longest string of rate cuts since May 2000. It reviews borrowing costs this week.

The Bank of Thailand will probably keep its benchmark interest rate unchanged on Feb. 27 as inflation accelerates, according to 9 of 15 economists surveyed by Bloomberg News. Six predicted a quarter percentage point cut to 3 percent.

Consumer prices rose 4.3 percent from a year earlier in January, the fastest inflation in 18 months, as fuel and food costs increased.

The government has signaled it may pressure the central bank to lower interest rates. Prime Minister Samak said on Feb. 18 the government will use monetary policy to support economic growth.

“They are favorable to cutting the interest rate,'' said Andrew Freris, chief economist for Asia Pacific at BNP Paribas in Hong Kong. “They have substantial problems on their hands. One is to maintain the impetus of growing business confidence and consumer confidence.''

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