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

1 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?

2 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 1 st 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.

3 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.

4 Confidence level in Thailand has improved significantly Source: BOT Consumer Confidence IndexBusiness Confidence Index

5 However, 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%

6 In particular, private consumption has rebounded sluggishly Source: BOT Private Consumption Index

7 The main constraint: high level of household debt 1 st nd rd th th th th th th th Average Decile % of HH % of Debt/ with Debt HH Income

8 As 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

9 But private investment also recovered slowly with many businesses waiting for the certainty of government projects Source: BOT, BOI Private Investment Index

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

11 And export growth also improved across the board Source: BOT

12 … with growth being driven by CLMV and US markets Source: BOT

13 GDP forecast for 2015 NESDB for % BOT for % Source: BOT

14 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.

Proposed infrastructure investment projects Development of water transportation network Improvement of highway network Enhancement of Thailand’s air transport competitiveness 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 5 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 4 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 15

16 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