Current Economic Situation and Outlook in Thailand

1
Current Economic Situation and Outlook in
Thailand
Kobsak Pootrakool 2 February 2015
2
Key questions

• What is the progress of the economic recovery in
  Thailand since the Coup D'état?
• What is the economic outlook for 2015?
• What are the key risks?

3
Key summary of the economic outlook

• The Coup d'état has resulted in a sharp
  improvement of sentiments of consumers and
  businessmen.
• Nevertheless, the rebound in economic activities
  has not been as quick as previously expected
  with mixed results across sectors.
• Consumers in the low income brackets experience
  much lower income prospects those in the middle
  income segment still burdened with the debt
  obligation from 1st car programs the best
  performing sectors are those related to high
  income families.
• On the business side, sectors related to
  infrastructure spending have renewed hopes on the
  government infrastructure projects but many
  still adopt wait-and-see approach.

4
Key summary of the economic outlook

• The baseline growth outlook for 2015 is around
  4.
• The key challenges of the Thai economy is not the
  recovery itself but how much the government will
  be able to accomplish in term of infrastructure
  spending and reforms of the country.
• If the reform process goes well, then it will
  provide a new platform for the economic progress
  down the road and will set Thailand to another
  level.
• Risk factors going forward include (1)
  implementation risks, (2) geopolitical risks, as
  well as (3) increasing volatilities in the global
  economy and Emerging Markets as the US continues
  with the normalization of its monetary policy.

5
Confidence level in Thailand has improved
significantly
Consumer Confidence Index
Business Confidence Index
Source BOT
6
However, the actual recovery is much weaker than
expected
Growth in Q3 YoY 0.6 QoQ 1.1
Growth in Q2 YoY 0.4 QoQ 1.1
Source NESDB
7
In particular, private consumption has rebounded
sluggishly
Private Consumption Index
Source BOT
8
The main constraint high level of household debt
of HH of Debt/with Debt HH Income
1st 34.2 29.8 2nd 44.6 9.3 3rd 48.2
7.1 4th 50.5 6.5 5th 52.5 7.3 6th 53.1
7.2 7th 58.6 8.2 8th 59.4 10.2 9th
62.4 11.9 10th 63.5 10.9 Average
52.7 10.1
Decile Decile Decile Decile Decile Decile Decile
Decile Decile Decile
9
As a result, Thailand is now entering a new phase
of growth
The debt financed growth by household sector
will come to a close and will need a new growth
enginepublic and private investment
Source BOT
10
But private investment also recovered slowly with
many businesses waiting for the certainty of
government projects
Private Investment Index
Source BOT, BOI
11
On the other hand, tourism industry started to
recover with increasing arrival of Japanese,
Chinese, Malaysian tourists.
Source BOT
12
And export growth also improved across the board
Source BOT
13
with growth being driven by CLMV and US markets
Source BOT
14
GDP forecast for 2015
NESDB for 2015 3.5-4.5
BOT for 2015 4.0
Source BOT
15
Key challenges for the government

• How can the government turn the improvement in
  sentiments into the real recovery in economic
  activities?
• Additional short-term stimulus measures
• Early harvest in term of public investment
  projects
• Additional support for other key sectors
  Tourism etc.

16
Proposed infrastructure investment projects
Development of water transportation network
1

• Development of ports
• Improved efficiency of
• water transportation and maintenance of river
  banks

Development of inter-city rail network
4

• Improved equipment and infrastructure
• Development of double-track rail

Improvement of highway network
2

• Improved access to
• agricultural and tourism areas
• Network to link cities and
• production bases
• Network for international
• transportation
• Improved road facilities
• to connect multi-channel
• transportation systems

Development of transportation in Bangkok its
vicinity
5
Enhancement of Thailands air transport
competitiveness
3

• Improved efficiency of airports
• Improved efficiency of air traffic to meet
  international standards
• Increased efficiency of air fleet
• Establishment of aircraft industrial estates
• Construction of buildings for civil aviation

• 10 electric train routes
• Buy 3,183 NGV buses and improve parking places
• Development of road networks and bridges in
  Bangkok and its vicinity

17
Key risks going forward

• Risk factors going forward include
• Implementation risks
• Geopolitical risks
• Repercussions from the normalization of US
  monetary policy to global financial markets
  and emerging markets