Thailand's economy outpaced expectations in the first quarter to expand at the fastest annual rate in three years, providing some relief for a military government that has struggled to stimulate growth in the two years since it seized power.

    Gross domestic product expanded 3.2 per cent in the three months through March from a year earlier, the National Economic and Social Development Board said on Monday. That compares with the 2.8 per cent median estimate in a Bloomberg News survey of 21 analysts. GDP grew 0.9 per cent from the previous three months, compared with 0.6 per cent median estimate.

    However, exports are expected to shrink for a fourth year running and consumption crimped by high household debts and the worst drought in a decade. For that, economists say the government may have to inject more fiscal stimulus to prevent economic momentum stalling.

    The Thai economy has yet to mount a firm recovery two years after the military ended months of political unrest with a coup. The two main drivers of growth - exports and domestic demand - remain weak.

    Bank of Thailand (BoT) Governor Veerathai Santiprabhob expects the economic recovery to be gradual and uneven, and last week cited risk from drought.

The upside surprise in the GDP data will allow the central bank to stay on hold for a while longer but it could act later if growth falters, economists say.