1. Quarterly Economic Review III October 10, 2013 Bhanupong Nidhiprabha Thammasat University

2. Main themes Growth and vulnerability Global slowdown and Business Cycle Synchronization Future risks: Fed tapering China slowdown US budget politics Risks from bad policy responses 2

3. 3 Mean = 3.2, SD = 4.6 SD/Mean = 1.4

4. IMF World Economic Outlook (GDP Growth) 20132014 Advanced Economies 1.22.0 Global Growth2.91.2 Japan2.01.2 EU-0.41.0 USA1.62.6 4

5. Impact of global slowdown 5

6. 6

7. 7

8. Risk Exposure to Global Slowdown 8 Source: ADB

9. High Time for Rebalancing 9 Source: Asian Development Bank

10. How to boost private investment 10 Source: Bank of Thailand

11. 11 Source: Bank of Thailand

12. Countercyclical Spending 12

13. 13

14. Quality of bank assets during recovery 14

15. Capital inflows (outflow) and currency appreciation (depreciation) 15

16. ASEAN-5 economies looked similarly during the GFC (2008-2011) 16

17. US Budget politics Debt ceiling deadline: October 17 The US government cannot borrow any more On October 17, the government would have $30 billion on hand, while the daily expenditures were about $60 billion. Default risk on interest payments on bonds Downgrading of the US’s credit rating Stock market crash Highest one-month bond interest in 5 years 17

18. Significant tail risks and bad policy responses Be prepared for capital flight after the Fed tapering: No more injection of $85 billion per month How far and how long can the BOT defend the baht? 18

19. Thai Budget Politics Consumer confidence Investor sentiment Business sentiment and effectiveness of fiscal policy 19

20. Fiscal Space and Alternative Growth Driver 20