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UPDATE 1-Thai economy shrinks less than expected, outlook raised

* Q3 GDP -6.4% y/y vs -8.6% in Reuters poll

* Agency raises 2020 GDP outlook to -6.0% from 7.3-7.8% fall

* 2020 exports seen -7.5% vs -10% projected earlier

* 2021 GDP seen up 3.5-4.5%, exports to rise 4.2% (Adds details, analysts’ comments)

BANGKOK, Nov 16 (Reuters) - Thailand’s economy shrank more slowly in the third quarter, with the contraction limited to 6.4% thanks to a recovery in domestic activity after coronavirus restrictions were eased but an ongoing travel ban has kept most foreign tourists away.

The data released on Monday by the National Economic and Social Development Council (NESDB) showed a marked improvement from the June quarter, when the economy suffered a 12.1% decline, the sharpest fall in over two decades.

On a quarterly basis, the economy expanded a seasonally adjusted 6.5% in the September quarter, the fastest pace in more than eight years, after a record contraction of 9.9% in the prior quarter.

Economists in a Reuters poll had forecast the economy would shrink 8.6% year-on-year and grow 3.8% quarter-on-quarter.

As a result, the government raised its 2020 outlook for a contraction of 6.0% from a previous forecast 7.3%-7.8% decline. It now expects exports to fall 7.5% this year, rather than drop 10%.

The upgrade came in amid a slump in tourism, tepid global demand, a strong baht and months of domestic political protests.

“The Q3 data was quite a surprise but the economic picture has not changed and we expect a decline until the first quarter,” said Thammarat Kittisiripat, economist of Tisco group.

While Thailand has removed most restrictions as local infections slow, its economy continues to suffer from soft global demand and the absence of foreign tourists. It started last month to let some foreign visitors return.

“A rising trend in the number of COVID-19 cases globally during the Northern Hemisphere winter will subdue the economy for the next two quarters,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.

On Monday, the NESDC said it expected 6.7 million foreign tourists to come to Thailand this year - between April and early October there were none - after last year’s record 39.8 million with their spending accounting for 11.4% of GDP.

It predicts only 5 million foreign visitors in 2021.

The government has supported the economy with a 1.9 trillion baht ($63 billion) stimulus package, while the central bank has slashed interest rates by 75 basis points this year to a record low of 0.50%.

The main stock index rose 1.37% at 0340 GMT while the baht was little changed at 30.14 per dollar. ($1 = 30.28 baht) (Additional reporting by Satawasin Staporncharnchai, Editing by Simon Cameron-Moore)

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