Monthly Economic Insight Prepared by : TMB Analytics Date: 21 March 2018
Executive Summary Synchronized global economic growth continued to brighten global economic outlook and global trade outlook. Globalwide improving economies could lead to tightening monetary from central banks, following Fed s gradual rate hikes. As a result, Converging monetary policies could further strengthen other currencies against the US dollar amid back drops of global economic recovery. However, recent US trade tariffs on steel and aluminum could trigger global trade war which possibly threaten global trade growth and affect global economy. In the beginning of Y2018, Thai domestic demand. economy continued to expand, supported by a strong external sector and improving Private consumption expanded especially from durable consumption and services, while private investment remained tepid, though gradually improved especially in equipment investment.. January exports expanded at 17.6% thanks to solid trading partner economies and rising oil prices, which amounted to 20.1 Bn USD. Exports to all major markets registered high positive growth, especially EU(25), Japan, CLMV, and ASEAN5. Agricultural products continuously grew from both price and quantity, including rice, cassava and seafoods. Industrial products contributed 2-digit growth to overall exports, mainly from vehicles & auto parts and electronic parts. However, US trade protectionism policies, recently the restrictions on the importation of steel and aluminum, may present risks to Thai exports. -1-
Executive Summary January, MPI increased 3.4%yoy with capacity utilization rate of 70.2%. Thailand Industrial outputs were continue to support by growth of export demand and recovery in domestic demand. Top Growth outputs were consumer goods (15.8%), healthcare (13.5%), autopart (11.9%), energy (9.2%) and vehicle (6.2%). Visitor arrivals to Thailand in January 2018, totaled 3.54 Mill, a growth of +10.9%yoy., mainly based on an increasing in arrivals from China, a resumption of growth from Russia and a strong performance by Korea and Laos. Receipts was hit 188 Billion Baht, a growth of +11.6%yoy. Which more than half also contributed from Chinese and Russian. The average occupancy rates were 78.7%, meanwhile, the average room rates were THB1,747.1/room/night (+12.1%yoy). We could possibly see an increasing in performance of hotel businesses. February inflation rate was 0.4%. Price increase was from higher energy prices, though weighed down by drop in fresh food prices. 2018 Inflation is expected to increase to 1.2% due to rise in energy price and domestic demand recovery. -2-
Executive Summary Year-to-date, Thai baht appreciated against the USD by almost 4.7% due to weak US dollar, strong current account surplus (from exports of goods and services) and fund flows into overall Asian markets. Moreover, recent concerns over US twin deficits (Trade deficit and Budget deficit), economic ramifications from global trade war which could be sparked by recent US trade tariffs and political turmoil in Washington D.C could keep suppressing the US dollar. Over medium to long term, shining economic growth outlook in Asia should attract fund inflows further and boost Asian currencies strength against USD. Thai baht could reach 31.0 THB/USD by the end of 2018 and could test 30 THB/USD mark, depending on how strong the fund inflow will be. However, negative spread (around -40bps) between UST-10Y yield and TGB-10Y yield could possibly lead to long-end local bond rout and foreign outflows. Looking forward, global trade policy as well as major central banks monetary policies should be closely monitored as impacts from trade protectionism and tightening monetary policy could weaken Thai Baht. -3-
Global Economy
Synchronized Global Recovery Boost Global Trade US EU GDP Growth (% YoY) -2.8-4.5 +2.5 +2.2 Unemployment (%) 9.3 4.0 9.6 8.6 Pre-Crisis Global Trade Value Trillion 30 USD 20 8.6 3 Months forecast JP +6.6 4.3 4.0 10 32 25 32 26 9 Months Actual JP -5 +1.4 09 18F 5.1 2.9 09 18F 0 '08 '09 '16 '17 Source: Bloomberg, CEIC, IMF, World Bank and TMB Analytics -6-
US Trade Policy could Disrupt Global Economic Growth Trend United States Eurozone US trade protectionism (Steel & Aluminum tariffs) could spark global trade war and create volatility in economic projection Subdued inflation could be persist until consumer spending and wage grow stronger Economy is projected to expand 2.5% in 2018 a bit higher from +2.3% in 2017 due to Tax cut policy Latest Releases Activity 2.5% QoQ SAAR Real GDP 4Q17 Price 2.2% YoY SA CPI Feb 18 Labor Mkt 4.1% Unemployment Rate Feb 18 Flattening yields curve accurately predict previous 7 recessions 5.0 % Spread between UST-10Y and UST-3M 4.0 3.0 UK economy expands more than expected, eases fears of economic ramifications from Brexit Continual expansion among manufacturing and service sectors (PMI above 50) sustain EU s growth Growth in 2018 is expected to be around +2.2%, however, global trade protectionism could be a major risk for economic outlook 65.0 60.0 Latest Releases EU Activity 2.7% YoY SWDA GDP 4Q17 UK Activity 1.4% YoY SWDA GDP 4Q17 Industry 56.2 EU Service PMI Feb 18 Sudden drops in EU Mfg. & Services spark some concerns EU Manufacturing PMI 2.0 1.0 0.0-1.0-2.0 Jan-67 Jan-77 Jan-87 Jan-97 Jan-07 Jan-17 Source: Bloomberg, IMF WEO, CEIC and TMB Analytics Decreased Increased Unchanged 55.0 EU Services PMI Expansion 50.0 Contraction 45.0 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18-7-
Resilient Economic Expansion in Japan & China Japan China Economy is likely to sustain above 1.0% expansion in 2018, supported by continual exports growth and robust private investment Inflation and consumer spending gradually improve which could prompt the Bank of Japan to reduce asset purchases program next year Strong yen could be a headwind for Exports and ongoing recovery Latest Releases Activity 1.6% QoQ SAAR Real GDP 4Q17 Price 1.4% YoY SA CPI Jan 18 Export +12.2% YoY NSA Jan 18 BoJ could taper their QQE as inflation moves toward 2% target 4.0 % GDP is likely to grow by 6.6% in 2018 where growth story could be altered from quantitative-focus to qualitative-focus Rebound in industrial sector galvanize rising profits and debt-repayment ability The success of economic and financial sector reforms could eases concern over economic growth or hard-landing Latest Releases Activity 6.8% YoY SWDA GDP 4Q17 Price 2.9% YoY CPI Feb 18 Industry Higher profits reflects higher producer prices 54.2 Caixin Serv. PMI Feb 18 40 % 8.0 % Tax hike Japan Core CPI YoY BoJ s 2% target Japan CPI YoY -1.0 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Source: Bloomberg, IMF WEO, CEIC and TMB Analytics 3.0 2.0 1.0 0.0-20 Decreased Increased Unchanged 20 0 China Industrial Enterprises total profits YoY (LHS) China PPI YoY (RHS) -40 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 4.0 0.0-4.0-8.0-8-
Steady Rise in Manufacturing and Services Sectors among Developed Countries US manufacturing sector outshines EU manufacturing sector Industry activities in Japan continue to rise steadily 65 60 60 US Mfg. PMI 60.8 58.6 55 Japan Mfg. PMI 54.1 55 EU Mfg. PMI 51.6 50 Expansion Contraction 50 China Mfg. PMI 45 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 65 No problem in Big Economies services sectors 45 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 60 Japan Services finally escape from contraction 60 US Services PMI 59.5 55 China Services PMI 54.2 55 56.2 51.7 50 EU Services PMI Expansion Contraction 50 Japan Services PMI 45 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Source: Bloomberg, CEIC and TMB Analytics 45 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18-9-
Global Monetary Policy Tightening could Lead to Thai Market Liquidity Squeeze Central Banks Balance Sheet Trillion USD 15 13 11 9 Fed s balance sheet expansion caused acceleration in Thai market liquidity BOJ s Balance Sheet Future balance sheet reductions will decelerate Thai market liquidity Trillion THB 3 2 7 5 3 1 Thai Market Liquidity (Cumulative foreign net inflows) ECB s Balance Sheet Fed s Balance Sheet '08 '10 '12 '14 '16 '18 '20 1 0 Source: Bloomberg, Fed, BoJ, ECB and TMB Analytics -10-
Why? No More CB s Money Via QE in 2019 FED Short-term rate: Fed Fund Dovish Hawkish 1H/2018 2H/2018 1H/2019 2 Rate Hike 1 Rate Hike 1 Rate Hike $ -20 bn $ -30 bn $ -40 bn $ -50 bn $ -50 bn B/S run-off ECB Short-term rate: Refin Rate Dovish Hawkish 0 Rate Hike 0 Rate Hike 0 Rate Hike Start QE Tapering *we expect 1 st hike in 2019 EUR 30 bn EUR 15 bn EUR 15 bn BOJ 0 Rate Hike 0 Rate Hike 0 Rate Hike Short-term rate: PR-Balances Dovish Hawkish Source: Bloomberg, Fed, BoJ, ECB, CEIC Bloomberg and and TMB Analytics JPY 80 Trillion / year JPY 80 Trillion / year JPY 40 Trillion / year -11-
Increasing Cost of Funds, Both in Baht and Dollar USD Rates Thai Government Bond Yield %year end 3.10 %year end 3 UST 10-Year 2.40 2.33 4 10Y Bond Yield 3.05 2 3 10-Year 2.32 1 1-Month Libor 1.56 2 2-Year 1.46 1.85 0 13H2 14H2 15H2 16H2 17H2 18H2 1 13H2 14H2 15H2 16H2 17H2 18H2 Source: Bloomberg, CEIC and TMB Analytics -12-
More Demands for Thai Baht in 2018 Q1-Q3/2017 FDI 9% Foreign net buy 13% EEC, BOI attract more investment Increasing EPS growth of listed firms 2018 Outlook Inflow Net Export Services 32% Continual expansion of Thai tourism Surplus Net Export Goods 18% No More Robust Trade Surplus Outflow Outflow Deficit TDI 15% Thai net buy 13% Growing economy lures more investments from Thai firms Brightening outlook of Foreign Investment Fund Industry Inflow Source: Bank of Thailand, CEIC and TMB Analytics -13-
Thai Baht is a New Safe Haven as Domestic Fundamentals Lessen External Impacts 36.00 35.00 34.00 33.00 32.00 31.00 30.00 Trump started presidency term Sell USD Theme GDP Source: Bloomberg and TMB Analytics Fed hiked policy rate by 25bps Macron won French election Fading EU political risk ECB s unintentionally signal QE tapering? 17Q1 17Q2 17Q3 17Q4 Strong THB Factors Robust Thai economy Geopolitical Risks USDTHB 2017 VS ECB finally tapered QE and extended QE until Sep 2018 1 Fed Hikes in December 2017 & Tightening dollar liquidity TARIFF Will Fed 1 st hike trigger another market sell-off? 31.50 Fund inflows from improving economy 18Q1 31.25 18Q2 Weak THB Factors CB s tightening monetary policies Pro-growth Trumponomics* & Trade Protectionism USDTHB 2018 3 Hikes & Robust Thai Economy 3 Fed s rate hikes Continual fund inflows High C/A surplus Dollar liquidity squeeze 30.50 18Q3 31.00 period-end 2018 Dollar Liquidity Squeeze fuels Baht selling 18Q4-14-
Warning! Tightening Interest Rate Gap Mean Decreasing Swap Points THB/USD 0.4 Swap Points = Forward Price Spot Price Swap point 3M Swap point 6M Repo rate - Fed Fund rate % 4.0 0.3 3.0 0.2 TMBA forecasted negative swap point in May 17 2.0 0.1 1.0 0.0 0.0 If RP > FFR => Positive Swap point -0.1 If RP < FFR => Negative Swap point -1.0-0.2 Exporters favor Positive Swap point Importers favor Negative Swap Point -2.0-0.3 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18-3.0 Source: CEIC and TMB Analytics -15-
Converging Monetary Policies and Stronger Fundamental Self-Support Currencies Against USD EUR/USD USD/JPY Stronger EU economy and ECB s tightening policy will boost the EUR. However, incoming political rout (Italian election) could shake EUR in Q1/18. Factors to Monitor Dovish BoJ could suppress JPY s rise in 1H/18, however, Weak dollar and gradually Hawkish BoJ will boost JPY toward 110 yen/dollar or lower. Factors to Monitor Robust Economy & ECB tapering EU political risk, Dovish ECB Weak US data & risk-off market Risk-On & yield curves steepen TMB Forecast Next 4 quarters 1Q18 1.23 2Q18 1.25 3Q18 1.28 4Q18 1.31 TMB Forecast Next 4 quarters 1Q18 108 2Q18 109 3Q18 107 4Q18 105 GBP/USD Prolong above-2% inflation will support the GBP. But sell-off from Brexit risk and dovish BOE could push the pair below 1.35 USD/GBP Factors to Monitor USD/CNY USD/CNY is expected to fluctuate around 6.45 yuan per USD as PBOC lets the pair to move according to actual transactions Factors to Monitor Stronger economy & More rate hikes Weak economy, Rate cut, More QE Stable FX policy & Improving economy Reserve outflows & waning economy TMB Forecast Next 4 quarters 1Q18 1.38 2Q18 1.43 3Q18 1.45 4Q18 1.42 TMB Forecast Next 4 quarters 1Q18 6.35 2Q18 6.30 3Q18 6.25 4Q18 6.30 Source: TMB Analytics -16-
2018 Key Events to Keep Eyes On EU Political Uncertainty Trade Protectionism CB Ready to Tighten Policy Robust Thai Economic growth Likelihood Medium* Medium* High Medium Severity* *Impact to financial market EM Fund Flows IN OUT OUT IN THB Bullish Bearish Source: TMB Analytics -17
Domestic Economy
Private Demand Continually Improved Overall Private Consumption Surged Sluggish, though Improving, Private Investment %yoy 20 10 0 Index 85 80 75 Services Durable %yoy 5 2 Index 53 50 Private Investment -10 70-20 65 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Cons Confidence (RHS) -1 47-4 44 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Biz Sentiment (RHS) Farm Income Dropped Mainly from Price Effect %yoy 45 30 15 0-15 -30 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Source: BOT and TMB Analytics Price Quantity Farm Income Private consumption expanded mainly from all product groups especially service and durable consumption, which is consistent with improving overall consumer confidence. Farm income growth remained negative as increase in quantity due to the appropriate weather was overwhelmed by price drops especially rubber and palm. Private investment slightly expanded mainly from equipment investment in line with better business sentiment, while construction investment remained sluggish. -19-
MPI Growth Rate (%YoY) Looking Forward, Thai Industrial Outputs Still Grow Up 15 13 10-3 -5 Manufacturing Production Index 8 5 3 0 Source: OIE and TMB Analytics 6.9 MPI (Export 30-60%) 3.4 2.4 MPI (Export<30%) -0.2 MPI (Export > 60%) -8 Jan-17 May-17 Sep-17 Jan-18 ALL MPI January 2018, MPI increased 3.4%yoy with 70.2% of capacity utilization rate. Thailand Industrial outputs were supported by export demand and recovery in domestic demand. Manufacturing Product Index (%YoY) 2016 2017 Jan-18 Production Trend (Oct17 - Jan18) Manufacturing Product Index (MPI) 1.4 2.1 3.4 Consumer Goods 0.5-1.0 15.8 Healthcare -1.5 5.1 13.5 Autopart -0.5 5.7 11.9 Energy 2.4 5.0 9.2 Vehicle 2.5 1.9 6.2 Papers & Printing 5.2 2.4 5.9 Rubber Product -1.3 14.7 5.3 Chemical -0.5 2.6 4.7 Packaging 3.5-2.5 4.0 Food 1.3 4.6 3.7 Electronic/Computer & Parts 1.6 7.5 3.0 Agricultural Machinery 5.8-5.0 2.2 Construction Material 0.3-1.0 0.7 Steel 9.2 1.6-0.4 Electronic/Electric Home Appliance 15.0-6.9-1.4 Beverage -0.2-0.1-5.0 Furniture and Household Products -16.8-2.8-5.3 Fashion Products -2.9-8.4-6.2 Plastics 1.1-5.9-8.2 Tabacco -9.2-16.9-23.0 Positive Growth Negative Growth -20-
Foreign Tourist Continued To Expand For All Nationalities Robust Growth Even Moderated Impact Of Low Base Effect From Zero-Dollar Crackdown Occupancy And Room Rate Were Hiking 15.1%yoy 50K 43K China 860K 970K 12.8%yoy Monthly Occupancy rate (%) 13.6%yoy 68K 60K 21K 20K Europe ASEAN 812K 668K 724K 901K 11.1%yoy 67.0 75.9 78.7 18K 17K East Asia 405K 452K 67.2 13K 12K Americas 161K 168K 2,537.5 2,489.8 Average Annual Occupancy rate (%) 7K 6K 6K 6K South Asia Oceania 5K 5KMiddle East 1K Africa 137K 166K 77K 82K 68K 14K 2018 2017 1,747.1 1,557.9 Room Rate per Night (Baht) Total receipts 188 Billion Baht (+11.6%yoy) Total arrivals 3.54 Million (+10.9%yoy) Jan'15 Jan'16 Jan'17 Jan'18 Visitor arrivals to Thailand in January 2018, totaled 3.54 Mill, a growth of +10.9%yoy. Growth in number of foreigner mainly based on an increasing in arrivals from China, now by far the largest source of visitors, a resumption of growth from Russia and a strong performance by Korea and Laos. Receipts was hit 188 Billion Baht, a growth of +11.6%yoy. Revenue more than half contributed from Chinese and Russian tourists spending. The average occupancy rates across the country surged 78.7% in Jan 18. Meanwhile, the average room rates nationwide has continued to increase to THB1,747.1/room/night (+12.1%yoy). Coupled with the continued upward trend of tourist number, they could possibly see an increasing in performance of hotel businesses. -21-
Thai Export..Continuing Expand in All Major Markets and Products What is 2018 outlook for Thai Export? Markets China +8.0 (2017 +23.7) CLMV +7.5 (2017 +13.1) USA EU Japan +7.0 (2017 +8.3) +5.5 (2017 +7.6) +5.0 (2017 +8.9) ASEAN 5 +3.5 (2017 +6.0) Total +4.8 (2017 +9.9) Continual economic growth supported by fundamental and high technological development Strong economic expansion Strong domestic consumption Recovery in household consumption and business Growth in domestic consumption and industrial production Continual economic and export growth from a raise in oil price Continuing Growth of trading partners Oil Price still affect on export growth Computer & Parts +6.5 (2017 +8.9) +6.5 (2017 +20.9) +6.0 (2017 +17.0) Electricals Appliance Steel Chemical Rubber Food +6.0 (2017 +16.1) +5.0 (2017 +37.9) +5.0 (2017 +6.8) Products Strong consumption supported by digital economy Solid expansion in global manufacturing production and major economies consumption Continued consumption growth from major trading partners Rising demand for tire mfg from China Expect better consumption, especially form EU and USA Sources: Ministry of Commerce and TMB Analytics -22-
A Surprise Growth of January Exports and Imports driven by Trading Partners Economic Expansion and a Rise in Oil Price Export 2018 Import 2018 9.9 17.6 0.5 0.8 6.3 2016 2017 Jan-18 12.8-0.3 3.6 Value Volume Price January export was 20.1 Bn USD, expanding by 17.6%(YOY) from the same period last year. Excluding oil and gold, export value grew by 17.7% (YOY). 73% of export growth driven by quantity mainly from the real sector due to global trade recovery. Sources: Ministry of Commerce and TMB Analytics 4.8-3.7 14.4 24.3-1.1 8.8 17.6 2016 2017 Jan-18-2.6 5.6 Value Volume Price January import value was 20.2 Bn USD and grew by 24.3% from the same period last year. 73% of import value driven by quantity. Products with highest import growth Energy Product (+46.9%) Steel & Metal Producer (+36.5%) Vehicle (+56.3%) Electronic/Computer & Parts (+18.2%) Chemical (+21.3%) Machinery Trader (+28.1%) 6.7-23-
Export registered A Strong Growth in Jan & expected to retain Its Momentum Highlights January export growth came from a solid economic expansion of major trading partners (EU25, Japan,CLMV, and ASEAN5). Moreover, TMBA expects export to perform well in the coming month, indicating in new orders index. Agricultural products grew continuously from both price and quantity, especially rice, cassava and seafoods. Industrial products expanded in 2- digit growth, mainly from vehicles & auto parts and electronic parts. Export Business Index: New Orders Index Key Exporting sectors 70.0 60.0 50.0 40.0 30.0 20.0 50% 40% 30% 20% 10% 0% -10% 17.6% 9.9% Expansion Contraction Jan-18 Major Exporting Markets 6.4% 14.3% 18.4% 13.2% 23.6% 11.6% 26.3% Sources: Ministry of Commerce and TMB Analytics Feb-18 52.2 50.0 2016 2017 Jan-18 8.5% 8.3% 11.3% 37.0% 11.0% WORLD ASEAN5 CLMV CHINA JAPAN USA EU25 Industrial Products Elec./ Com & Parts (18%) Vehicle (18%) Elec./ Home App. (18%) Commodity Products Chemical (7%) Steel (4%) Energy (3%) Agricultural Products Rubber (5%) Agro Products (4%) Rice (2%) Export Trend in the remaining of the year 2016 2017 Jan-18 8.9 8.8 20.4 16.1 17.5 9.4 22.1 28.7 20.9 28.9 29.1 37.9 10.5 36.8-2.1 20.7 17.4 37.2 Expanded more than overall exports (4.8%) +1% Expanded +/-1% from the overall exports (4.8%) Expanded less than overall exports (4.8%) -1% Factors Affecting Sectors High-Technology development of major countries Auto parts demand came mainly from Japan, Philippines, Australia, and Africa Electricity expanded because of major trading partners An increase in crude oil price and expansion of global manufacturing production Expansion in global manufacturing production, but risks of U.S. steel import tariff Rise in Crude oil price Natural rubber shrink mainly due to a decrease in rubber price Global demand expanded more than 80% Expected production to increase because of adequate water in the dam -24-
U.S. Steel Imports and Thailand s Possible Exposure to Steel Exports U.S. steel importing countries face tariff of 25% According to affected steel articles (7206.10-7206.50, 7216.99-7301.10, 7302.10, 7302.40-7302.90, 7304.10-7306.90) Thailand s possible exposures to steel exports Total export value (according to affected steel articles) : 2.5 Bn USD Rest of the world Only Canada and Mexico are exempt from 25% valorem tariff on steel articles as waiting for the result of NAFTA negotiation Thailand is ranked 19 th U.S. steel imports Thailand $0.4 bn (1.4%) ($7.5 bn) 73% ($21.2 Bn) Bn USD Canada South Korea Mexico Brazil Germany Japan Russia Taiwan Turkey China Thailand 0 2 4 6 Bn USD ASEAN5 CLMV U.S.A JAPAN EU(25) INDIA TAIWAN CHINA S. KOREA AFRICA 0.0 0.5 1.0 0.4 0.4 0.3 0.1 0.5 Direct Effect : U.S. (16%) Thai steel export value to the US expected to reduce only 4% of the total steel export last year. Key Major Affected Products are as followed Pipe Products (50%) Flat Products (34%) Industrial Products (7%) However, there is the indirect impact of the US steel import tariff from 1) an increase in steel products to ASEAN countries or 2) supply-chain of ASEAN countries to the US. Key Major Affected Products are as followed Long Products (34%) Aluminum (24%) Pipe Products (18%) Sources: Ministry of Commerce and TMB Analytics -25-
Expect Accelerating Public Investment to Drive Growth In January, investment spending growth turned positive with 42% increase from last year after contracting in 1QFY18. More disbursement is expected in 2QFY18 due to smoother adoption of new procurement regulation. For megaproject investment, several projects were revised, causing the reduction in total number of projects from 51 projects to 44 projects worth 1.9 trillion BHT in 2018. It is expected to ripple out more private investment. Examples of the megaprojects are Double Track Railway (Nakhon Pathom-Chumphon) and High Speed Train connecting 3 important airports. Capital Budget Disbursement Capital Budget Disbursement Rate Billion THB 60 50 2015 2016 2017 2018 18% 4MFY18 Disbursed 40 30 20 70% FY17 Disbursed 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Fiscal Policy Office and TMB Analytics -26-
Policy Rate Normalization is Expected to Begin Later This Year Subdued Inflation from Food Price Drop due to Oversupply Avg17 = 0.7% Feb18 0.4% February inflation rate was 0.4%. Energy price increases were weighed down by tumbling fresh food prices causing lower-than-expected February inflation. Due to expected higher energy prices, We expect inflation rate to be averaged at 1.2% in 2018. Policy Rate is Expected to be Held at 1.50% as Inflation Remains Low % Source: MOC, BOT, CEIC and TMB Analytics We expect the rate normalization to begin later this year as global interest rate is on an upward trend following 3 fed rate hikes in 2017 and expected other 3 hikes this year. Thai policy rate is forecasted to increase to 1.75-2% at the end of 2018. However, there is still concern over recovery of private investment, which can delay Thai rate normalization. -27-
THANK YOU Disclaimer This document is issued by TMB Analytics, a division of TMB Bank PCL. All analyses are based on information available to the public. Although the information contained herein is believed to be gathered from reliable sources, TMB makes no guarantee to its accuracy and completeness. TMB may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Opinions or predictions expressed herein reflect the authors views, not that of TMB, as of date of the analysis and are subject to change without notice. TMB shall not be responsible for the use of contents and its implication.