Current Economic Situation and Outlook in Thailand

Kobsak Pootrakool2 February 2015

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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?

3Key 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.

4Key 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.

5Confidence level in Thailand has improved significantly

Source: BOT

Consumer Confidence Index Business Confidence Index

6However, the actual recovery is much weaker than expected

Source: NESDB

Growth in Q3

YoY: +0.6%

QoQ: +1.1%

Growth in Q2

YoY: +0.4%

QoQ: +1.1%

7In particular, private consumption has rebounded sluggishly

Source: BOT

Private Consumption Index

8The main constraint: high level of household debt

1st 34.2 29.82nd 44.6 9.33rd 48.2 7.14th 50.5 6.55th 52.5 7.36th 53.1 7.27th 58.6 8.28th 59.4 10.29th 62.4 11.910th 63.5 10.9

Average 52.7 10.1

DecileDecileDecileDecileDecileDecileDecileDecileDecileDecile

% of HH % of Debt/with Debt HH Income

9As a result, Thailand is now entering a new phase of growth

Source: BOT

The debt financed growth by household sector will come to a close and will need a new growth engine:public and private investment

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But private investment also recovered slowly with many businesses waiting for the

certainty of government projects

Source: BOT, BOI

Private Investment Index

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On the other hand, tourism industry started to recover with increasing arrival of Japanese, Chinese, Malaysian tourists.

Source: BOT

12And export growth also improved across the board

Source: BOT

13… with growth being driven by CLMV and US markets

Source: BOT

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GDP forecast for 2015

NESDB for 2015

3.5-4.5%

BOT for 2015

4.0%

Source: BOT

15Key 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.

Proposed infrastructure investment projects

Development of water transportation network

Improvement of highway network

Enhancement of Thailand’s air transport competitiveness

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• Development of ports• Improved efficiency of

water transportation and maintenance of river banks

• 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

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• 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

Development of inter-city rail network

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• Improved equipment and infrastructure

• Development of double-track rail

• 10 electric train routes • Buy 3,183 NGV buses and

improve parking places• Development of road networks

and bridges in Bangkok and its vicinity

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Key risks going forward

Risk factors going forward include:

Implementation risks Geopolitical risksRepercussions from the normalization of US monetary policy to global financial markets and emerging markets