* Q2 GDP 0.4% q/q sa vs -1.4% in Reuters poll * Q2 GDP +7.5% y/y vs +6.4% in poll * Agency cuts 2021 GDP growth outlook to 0.7-1.2% from 1.5-2.5% * Sees 2021 exports at +16.3% vs +10.3% estimated earlier (Adds c.bank chief’s comments in paragraphs 9-10) BANGKOK, Aug 16 (Reuters) - Thailand’s economy unexpectedly grew in the second quarter from the first helped by exports and government spending, but spiking COVID-19 cases continue to batter domestic activity and tourism, restraining its fragile recovery. The government cut its 2021 economic growth forecast to 0.7-1.2% from 1.5-2.5%, the third time it has done so, as it battles to contain its biggest COVID-19 outbreak amid a slow vaccination rollout. The economy slumped 6.1% last year. Thailand’s biggest COVID-19 outbreak so far has seen a spike in cases and deaths, prompting tougher containment measures in Bangkok and nearby provinces in July before being extended this month and expanded to areas which account for around 80% of GDP. Southeast Asia’s second-largest economy grew a seasonally adjusted 0.4% in the second quarter, data from the National Economic and Social Development Council showed, versus a forecast 1.4% drop in a Reuters poll. From a year earlier, gross domestic product grew 7.5%, beating a forecast 6.4% rise, due largely to a GDP slump last year when the pandemic first hit. “While today’s release was a bright spot, headwinds remain large with the effect of the Delta variant”, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank. Policy support from monetary, fiscal, and medical remain paramount to prevent the Thai economy from a double-dip recession, he said. “Any easing of the policy rate needs to be supplemented with the distribution to the real sector or else, it remains a purely academic exercise”. In early August, the Bank of Thailand voted to hold the key rate at a record low 0.5%. On Monday, BOT Governor Sethaput Suthiwartnarueput told a separate news conference Thailand would need a further 1 trillion baht ($29.9 billion) to support jobs and income losses. Jobless numbers are expected at 3.4 million at the end of this year, he added. The BOT maintains its 0.7% growth forecast this year but could revise that if the lockdown continues to the fourth quarter, he said, adding the lockdown would cut GDP by 0.3-0.4% per month. The baht eased slightly in mid-afternoon trade while the stock market hit its lowest since mid-May but later recovered. The economy has yet to slip into a recession but momentum has slowed since the widespread outbreak began in April, NESDB head Danucha Pichayanan told a news conference. “If the outbreak cannot be contained in the third quarter and the lockdown is not eased in the fourth quarter...the economy could grow less than 0.7% this year,” he said. However, increased exports and fiscal measures have lent some support. The NESDC now expects exports to grow 16.3% this year versus a 10.3% rise projected earlier. But it predicts only 150,000 foreign tourists this year, down from 500,000 seen previously, and against 40 million foreign visitors in 2019. The latest outbreak has accounted for most of Thailand’s total cases and deaths at a time when it was preparing to reopen more broadly to foreign visitors. Thailand could see coronavirus cases double to 45,000 per day by early next month, even with the current lockdown, according to its COVID-19 taskforce. Anti-government protests calling for the resignation of Thailand’s prime minister over the handling of the COVID-19 crisis and its impact on the economy has also raised political uncertainty and worries over policy continuity, analysts say. This year, the government approved a 500 billion baht borrowing plan for relief measures. ($1 = 33.44 baht) (Reporting by Orathai Sriring and Kitiphong Thaichareon, additional reporting by Satawasin Staporncharnchai Editing by Jacqueline Wong) Our Standards: The Thomson Reuters Trust Principles.