1. KBank Capital Markets Perspectives 20 February 2012
Thai GDP dropped due to flood impact
§ Thai economy in the fourth quarter dropped by 9.0% yoy %
or 10.7%qoq seasonal adjusted due to the decline in both 15
domestic and external demand as well as industrial 10
production as a result of severe flooding situations in
3.9
Thailand. 5 2.3 2.5 2.7 1.8 1.5 0.8
0
§ This resulted in the full year GDP growth of only 0.1% in 0
-0.3 -0.5
2011, much less than NESDB’s forecast of 1.5% and -5 -2.4
BOT’s forecast of 1%.
-10
§ NESDB expected Thai economy to grow by 5.5%-6.5% in GDP yoy GDPsa qoq-10.7
2012 (compared with BOT’s number of 4.9%), up from -15
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
prior forecast of 4.5%-5.5%, as investment from both
private and public sectors is likely to increase. However,
NESDB revised down export growth in 2012 exports from Source: NESDB
19% to 17.2%, while inflation is projected to be in the
range of 3.5%-4.0% in 2012.
Amonthep Chawla, Ph.D. Puttikul Ackarachalnaonth
amonthep.c@kasikornbank.com puttikul.a@kasikornbank.com
Disclaimer: For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was obtained from
sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein. Further information on the securities referred to herein may be obtained upon request.
1
2. GDP 4Q 2011 dropped as floods hit manufacturing sector
Contribution to GDP growth
§ Thai economy in the fourth quarter dropped by 9.0% yoy or % yoy/ contribution
10.7%qoq seasonal adjusted due to the decline in both domestic 15
and external demand as well as industrial production as a result
10
of severe flooding situations in Thailand.
5
§ The floods resulted in the decrease in both private and
government consumption as well as the total investment. 0
Household consumption dropped by 3%, compared to a rise of
2.4%yoy in Q3. Government consumption expenditure dropped -5
Private consumption Government Consumption
by 3.1%yoy, compared to a rise of 4.9%yoy in 3Q and total
-10 Gross fixed capital formation Inventory change
investment dropped by 3.6%yoy, compared to the rise of
Net exports GDP yoy
3.3%yoy in 3Q. -15
§ Exports value of goods and services were also affected from the 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
% yoy
flooding situation and thus dropped from THB2.22trn in Q3 to 15
Growth of domestic demand dropped in Q4
THB1.82trn in Q4. The same to import. Import dropped from
THB2.07trn in Q3 to THB1.87trn in Q4. 10
§ Net export of goods and services (i.e. export minus import) 5
dropped by 36.9% yoy. Exports of goods fall 6.9% yoy while
0
exports of services fall 4.8% yoy.
1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
-5
§ This resulted in the full year GDP growth of only 0.1% in 2011,
much less than NESDB’s forecast of 1.5% and BOT’s forecast -10
of 1%. Private consumption
-15 Government Consumption
Gross fixed capital formation
-20
2
3. NESDB expects Thai economy will go back to normal level in Q2
% yoy %
Manufacturing production and capacity utilization
40 70
§ NESDB expected Thai economy to grow by 5.5%-6.5% in 2012 30
(compared with BOT’s number of 4.9%), up from prior forecast 20 65
of 4.5%-5.5%, as investment from both private and public 10 60
sectors is likely to increase. However, NESDB revised down 0
-10 55
export growth in 2012 exports from 19% to 17.2%, while inflation -20
is projected to be in the range of 3.5%-4.0% in 2012. -30 50
-40 45
§ NESDB Secretary-General Akom Termpittayapaisit said GDP -50
Q1 2012 would turn positive but the growth would not be so high -60 40
while the factories in the industrial estates starting to recover. Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
However, Q2 would be better. According to NESDB, Thai
economy will be back to normal in the second quarter of this Manufacturing production index ISIC (% yoy, left) Capacity Utilization (% , right)
year. Noted that BOT expected the manufacturing sector to fully Relationship between Thai GDP and industrial production
Thai GDP, real, SA
recover in the third quarter of this year.
1,300,000
§ Industrial production is very important to the contribution to Thai y = 4288.9x + 332903
1,200,000 2
GDP. As shown, there is a high correlation between industrial R = 0.9689
production index and Thai GDP, real, SA. How fast Thai 1,100,000
economy will recover depends on how fast the manufacturing 1,000,000
resumes its normal operation. 900,000
800,000
700,000
600,000
80 100 120 140 160 180 200 220
industrial production index
3
4. During economic recovery, what’s the trend of USD/THB?
Currency performance
§ Economic slump owing to the severe floods is likely to be INR 7.7%
stimulated by various measures of the government. Imports are MYR 4.7%
expected to rise as industries are likely to replace machines that SGD 3.3%
were damaged. Production will soon resume its normal process
PHP 3.0%
while increase in exports will follow. During this economic
THB 2.6%
recovery, trade deficits are likely to cause an upward bias for the
KRW 2.6%
USD/THB.
TWD 2.5%
§ However, the USD/THB is likely to be supported on the IDR 0.3%
downward bias following large fund flows to the capital markets. Change against USD, year-to-date
CNY -0.1%
The effects of capital flows are believed to outweigh trade
JPY-3.2%
deficits. Thus, we projected the USD/THB to approach 29.50
YE2012. The USD/THB is seen to be volatile amid different -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
timing of the demand for US dollar for imports and capital
inflows. 600 Net capital inflows to Thailand’s capital markets
§ Regarding the price level, since the government is planning to 500
stimulate consumption by various policies, particularly a policy to 400
increase the minimum wage, higher consumption is likely to 300
cause inflationary pressure. Despite risk of financial crisis in the 200
eurozone that could affect external demand, the BoT is likely to 100
hold the policy rate at 3.00% though out the year for fear that 0
inflationary pressure from economic stimulus plan would cause -100
macroeconomic instability. Jan-2010 May-2010 Sep-2010 Jan-2011 May-2011 Sep-2011 Jan-2012
sum of foreign equity / fixed income flows
4
