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TISCO Wealth- กรุงเทพธุรกิจ Investment Forum Thailand Economic Briefing

TISCO Wealth- กรุงเทพธุรกิจ Investment Forum Thailand Economic Briefing. Kampon Adireksombat, Ph.D. Senior economist TISCO Economic Strategy Unit | ESU. 1. Global Recovery Stalls. GDP growth rate. Unit: % YoY. Emerging and developing economies. World economy. Advanced economies.

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TISCO Wealth- กรุงเทพธุรกิจ Investment Forum Thailand Economic Briefing

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  1. TISCO Wealth- กรุงเทพธุรกิจ Investment Forum Thailand Economic Briefing Kampon Adireksombat, Ph.D. Senior economist TISCO Economic Strategy Unit | ESU 1
  2. Global Recovery Stalls GDP growth rate Unit: % YoY Emerging and developing economies World economy Advanced economies Source: IMF’s World Economic Outlook (January 2012), TISCO Economic Strategy Unit (ESU) 2
  3. Among emerging countries, robust growth in Asia GDP growth rate Unit: % YoY 8.8% China 8.2% India 7.3% 7.0% ASEAN-5 5.6% 5.2% Brazil 4.0% 3.0% 3.4% South Africa 2.5% Note : ASEAN-5 includes Indonesia, Malaysia, Philippines, Thailand and Vietnam Source: IMF’s World Economic Outlook (January 2012), TISCO Economic Strategy Unit (ESU) 3
  4. Developed countries: downside risks intensify GDP growth rate Unit: % YoY 2.2% US 1.8% Japan 1.6% 1.7% 1.5% Germany 1.0% France 0.3% Spain -0.3% 0.2% -0.6% Italy -1.7% -2.2% Source: IMF’s World Economic Outlook (January 2012), TISCO Economic Strategy Unit (ESU) 4
  5. US: Employment figures improved further US unemployment rate US total employment Unit: % Unit: million workers Source: Federal Reserve, TISCO Economic Strategy Unit (ESU) 5
  6. Weak spot: housing markets remain depressed S&P Case-Shiller 20-City Home Price Index Unit: Index New low Source: Federal Reserve, TISCO Economic Strategy Unit (ESU) 6
  7. CPI 3.0% QE1 2.4% PCE QE2 Despite easing, PCE inflation is still above the Fed’s target Headline CPI, Price Index of Personal Consumption Expenditures (PCE) Unit: % YoY The Federal Reserve sets the inflation targeting using the PCE inflation of 2% as a benchmark Source: Federal Reserve, TISCO Economic Strategy Unit (ESU) 7
  8. Eurozone sovereign debt crisis: a vicious circle START Mitigated by the ECB-LTRO programs Source: TISCO Economic Strategy Unit (ESU) 8
  9. Most EU countries face 2012F GDP contraction GDP growth forecasts Unit: % Ireland Germany France Spain Italy Portugal Greece 2012F (as of 11-Nov-11) 2012F (as of 10-Feb-12) Source: Deutsche Bank, TISCO Economic Strategy Unit (ESU) 9
  10. Unemployment rates continue to rise Unemployment rate, seasonally adjusted Unit: % Spain Greece Ireland Portugal France Italy Germany Note: Latest figures are as of Sep’11 for France, Oct’11 for Greece, Dec’11 for Germany, Italy, Spain and Portugal, and Jan’12 for Ireland Source: Bloomberg Finance LP, TISCO Economic Strategy Unit (ESU) 10
  11. China: expect slow GDP growth in 1Q12 China GDP growth rate Unit: % QoQ (saar) Due to sharp slowdown in fixed asset investment in real estate and exports. Source: National Bureau of Statistics of China, Deutsche Bank, TISCO Economic Strategy Unit (ESU) 11
  12. Inflation rate accelerated but is likely to ease soon Inflation rates Reserve Requirement Ratio, M2 growth Unit: % Unit: % (LHS), % YoY (RHS) Temporary rise in food prices due to cold weather and Chinese New Year(Jan’12 vs Feb’11) Expect further monetary easing Reserve Requirement Ratio Food Headline Non-food M2 growth rate (RHS) Source: Bloomberg Finance LP, TISCO Economic Strategy Unit (ESU) 12
  13. Our view on Thai economy GDP growth Policy rate (year end) Headline inflation THB/USD (year end) 2012 TISCO ESU forecasts Comments Industrial production and private consumption have started to recover after the floods crisis. Therefore, we maintain our view of a full recovery in 2Q12. Note that this is faster than the BoT’s expectation (3Q12). With a lower-than-expected base in 2011 and a prospect of higher exports and public investment, we revise up our 2012 GDP forecast to 5% (from 4.5% previously). 5.0% Expect the inflation rate to stabilize throughout 1H12 as domestic demand should pick up in the coming months on the back of government stimulus policies. Increasing upside risks to inflation from rising global oil prices 3.5% With upside risk on inflation and additional monetary easing from the soft loan program, we maintain our view of a flat policy rate at 3% throughout 2012 with an upside risk in 2H12 3.0% In the next coming months, expect THB appreciation due to capital inflows and fading Greek default threat 31.0 Source: National Economic and Social Development Board (NESDB), Bank of Thailand (BoT), Ministry of Commerce (MoC), TISCO Economic Strategy Unit (ESU) 13
  14. No growth in 2011 as 4Q11 GDP growth fell 9% Thailand GDP growth rate Unit: % YoY Source: NESDB, TISCO Economic Strategy Unit (ESU) 14
  15. Revise up 2012 GDP growth forecast to 5% GDP and Economic Components Source: NESDB, TISCO Economic Strategy Unit (ESU) 15
  16. Subsiding supply disruptions triggered a rebound in manufacturing output Manufacturing Production Index (MPI) and Capacity Utilization (CAPU) Unit: % (LHS), % YoY (RHS) Jan ’12 MPI surged by 12.7% MoM, driven by the automobile and electronics industries. Japan Tsunami Flood Source: BoT, Office of Industrial Economics (OIE), TISCO Economic Strategy Unit (ESU) 16
  17. 5.6% 4.0% Headline Deficit 3.2% Primary Deficit 1.5% Impact of Bt350bn Water Management System (WMS) and Bt50bn Flood Insurance Fund (FIF) FY2012 on- and off-budget deficit forecast (% of GDP) Unit: % Note: WMS denotes water management system projects. FIF represents flood insurance fund. Source: Bureau of the Budget, TISCO Economic Strategy Unit (ESU) 17
  18. Only a small portion of WMS budget will be disbursed in 2012 WMS projects disbursement estimates Unit: Billion THB FY2012F FY2013F FY2014F Total Note: To calculate WMS disbursement rate, we apply the TKK disbursement rates, 65%, 20%, and 15% in the 1st, 2nd, and 3rd year, respectively. We also assume that the projects will be ready to disburse in May 2012. Sources: Ministry of Finance (MoF), TISCO Economic Strategy Unit (ESU) 18
  19. Even with the decrees, public debt is unlikely to exceed 60% of GDP TISCO ESU Public debt trajectory Unit: % of GDP Sources: Public Debt Management Office, TISCO Economic Strategy Unit (ESU) 19
  20. Domestic demand is a key driver for 2012 GDP 2012 Contribution to GDP Growth Unit: percentage point (ppt.), % Domestic Demand External Demand GDP Investment Private Consumption Government Consumption Change in inventories Exports Imports Note: Figures may not total exactly due to rounding. Source: TISCO Economic Strategy Unit (ESU) 20
  21. Surging global oil prices … WTI, Brent, and Dubai crude oil prices Unit: USD per barrel Brent Dubai WTI Note: Data as of February 24, 2012 Source: Bloomberg Finance LP, TISCO Economic Strategy Unit (ESU) 21
  22. Due to tension between Iran and Israel Top 5 crude oil producers Top 5 crude oil reserves Unit: Million barrels per day Unit: Billion barrels Note: Data as of Oct’11 for world crude oil production, and end-2009 for world crude oil reserves Source: U.S. Energy Information Administration (EIA), TISCO Economic Strategy Unit (ESU) 22
  23. Thus, increasing upside risks to inflation Growth rates of Dubai crude prices, retail diesel prices, energy CPI, transportation CPI Unit: Index (Jan’05 = 100) If the Dubai oil price increases by 10%, the headline CPI will increase 0.5ppt from the base-line level. Dubai Diesel Energy CPI Transportation CPI Source: Bloomberg Finance LP, MoC, Energy Policy and Planning Office, TISCO Economic Strategy Unit (ESU) 23
  24. Maintain a policy rate of 3% throughout 2012 Headline inflation, policy interest, and real policy interest rates Unit: % With upside risk to inflation and additional monetary easing from the soft loan program, we maintain our view on a flat policy rate at 3% throughout 2012 with an upside risk in 2H12. Headline inflation Forecast Policy interest rate Real policy rate Source: BoT, MoC, TISCO Economic Strategy Unit (ESU) 24
  25. Euro (RHS) Foreign net flows (LHS) Thai baht (RHS) In the next few months, expect THB appreciation due to capital inflows & fading Greek default threat Cumulative foreign net buy in SET, Indices of Euro currency and Thai baht Unit: THB bn (LHS), Index – First date of 2011 = 100 (RHS) Note: Data as of February 24, 2012 Source: Bloomberg Finance LP, TISCO Economic Strategy Unit (ESU) 25
  26. End of document 26
  27. Disclaimer The information, statements, forecasts and projections contained herein, including any expression of opinion, are based upon sources believed to be reliable but their accuracy completeness or correctness are not guaranteed. Expressions of opinion herein were arrived at after due and careful consideration and they were based upon the best information then known to us, and in our opinion are fair and reasonable in the circumstances prevailing at the time. Expressions of opinion contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. TISCO and other companies in the TISCO Group and/or their officers, directors and employees may have positions and may affect transactions in securities of companies mentioned herein and may also perform or seek to perform investment banking services for these companies. No person is authorized to give any information or to make any representation not contained in this document and any information or representation not contained in this document must not be relied upon as having been authorized by or on behalf of TISCO. This document is for private circulation only and is not for publication in the press or elsewhere. TISCO accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its content. The use of any information, statements forecasts and projections contained herein shall be at the sole discretion and risk of the user. Important Notice : This Document may only be issued or passed on to any person in the United Kingdom if that person is of a kind described in Article 11 of the Financial Services 1986 (Investment advertisements) Exemptions Order 1996 or otherwise pursuant to exemptions to Section 57 of the Financial Services Act 1986. In addition, no person who is an Authorised Person may issue or pass on this Document, or otherwise promote the Company, to any person in the United Kingdom other than under the rules of self-regulatory organisations or the Financial Services Authority applicable to such Authorised Persons. This Document is confidential and is intended solely for the use of its recipient. Any duplication or redistribution of this Document is prohibited. 27
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