19
1
1
• Headline inflation forecast is revised down due to the slower-than-expected increase in oil price. However, headline inflation is expected to return to the inflation target in 2016H2. Core inflation remains unchanged from the last assessment.
• Downside risks to growth and inflation forecasts increase due to (1) Brexit, which might affect global economy’s recovery, and (2) the number of tourists that might be lower from the slower global economy as well as the government’s attempt to tackle zero-dollar tour operations.
• The monetary policy remains conducive to the economic recovery,while ensuring financial stability.
Key developments and outlook
• Thailand’s economic growth projection in 2016 is slightly higher due to a better-than-expected consumption growth in 2016Q2 partly from temporary factors and the government’s stimulus measures. The growth in 2017 remains as previously assessed. Higher public investment offsets the exports and private investment that have decreased due to weaker trading partners’ economic prospects.
2
*Outturn, ( ) Monetary Policy Report, June 2016
2015* 2016 2017
GDP Growth 2.8 3.2 3.2
(3.1) (3.2)
Headline Inflation -0.9 0.3 2.0
(0.6) (2.2)
Core Inflation 1.1 0.8 1.0
(0.8) (1.0)
Forecast Summary as of September 2016
3
• Euro area and the UK:Slower recovery due to private sentiment affected by uncertainty from Brexit
• US: Moderate recovery, with risks from the upcoming election
• Japan: Slow recovery with the help from government’s measures
• China: Decelerating growth in line with the previous assessment
• Asia: Lower growth following trading partners’ economy
USA Keeps monetary policy accommodative longer than expected
Euro Conducts further easing monetary policy
Japan Continues its accommodative monetary policy through negative interest rate and QQE
Trading partners’ growth are projected to be lower than expecteddue to Brexit; monetary policy remains accommodative in major countries
Asia’s merchandise exports by country (USD term)Index, 3mma sa (Jan 2013 = 100)
Source: CEICNote: Indonesian export value excludes oil
708090
100110120130
Jan2013
Jul Jan2014
Jul Jan2015
Jul Jan2016
Jul
CNPH
MYID
TW
July 16
TH_Exgold
90
100
110
120
130
140
150
160
170
80
100
120
140
160
180
200
220
240
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
World exports (RHS)
Emerging Asia's exports
Thai exports
4
%YoY 2015* 2016 2017
As of Jun 2016-5.6
-2.5 0.0
As of Sep 2016 -2.5 -0.5
Projection of merchandise exports value (USD)
Thai merchandise exports are projected to contract more than expected
* Outturn
Going forward, global economy and structural factors are important determinants of merchandise export performance.
• 2016: Export value remains the same, with higher gold export’s offsetting contracted merchandise exports.
• 2017: Export value is expected to register a small contraction since the recovery of trading partners’ economies is affected by Brexit.
Sources: Netherlands Bureau for Economics and Ministry of CommerceCalculated by BOT
Index, 3mma sa (Jan 2013 = 100) Index, 3mma sa (Jan 2013 = 100)
Thai Exports vs the Region and the World exports
Number of foreign tourists has been revised down
Projection of Foreign Tourist Arrivals
5
* Outturn
Million 2015* 2016 2017
As of Jun 1629.8
34.0 36.7
As of Sep 16 33.6 36.3
This comes as a result of• the slower-than-expected recovery of global economy,• government’s attempt to tackle zero-dollar tour operations, which will affect
the number towards the end of 2016 through early 2017,• bombing incidents in August, which will affect the number
in the second half of 2016.
Comparing to the previous assessment, downside risk increased from the government’s attempt to tackle zero-dollar tour operations, which could affect the number of tourists more than the assessment in the baseline projection.
Private consumption growth projection for 2016is revised up and will have moderate growth in 2017
• Private consumption growth in 2016Q2 was better than expected, partly from temporary factors, e.g. promotion, introduction of new car models, and government’s stimulus measures.
• In the future, though growth will be slower than in Q2, private consumption will continue to grow with supports from government’s measures, growing employment in agricultural and service sectors, while income of exporting manufacturers is slow to recover.
80
90
100
110
120
130
Jan2014
Jul Jan2015
Jul Jan2016
Jul
Non-durable consumption indexService consumption index*Durable consumption index
* Consists of VAT from hotels and restaurants, and revenue of transportation services.
Private consumption indicatorsIndex, 3mma sa (Jan 2014 = 100)
6Sources: The Nielsen Company and the Revenue Department, calculated by BOT
20
25
30
35
40
45
50
Jan2014
Jul Jan2015
Jul Jan2016
Jul
Index, 3mma sa
Agriculture
Non-agriculture
Source: Ministry of Commerce, calculated by BOT
Consumer confidence classified by occupation
July 16 July 16
Public investment prospect is better than previously assessed after the result of Thailand’s referendum on the constitution
• 2016: Public investment is revised down slightly due to the lower-than-expected SOE’s investment in Q2, although it is expected to pick up slightly towards the end of the year due to measures to expedite budget disbursement of the central government.
• 2017: Public investment is projected to be higher than assessed, due to the continuity of infrastructure projects following the result of the referendum.
Billion Baht
2015*2016 2017
As of Jun 16 As of Sep 16 Change As of Jun 16 As of Sep 16 Change
Consumption 2,334 2,482 2,474 -8 2,637 2,637 -1
Investment 864 955 946 -9 1,035 1,054 18
Total 3,199 3,437 3,420 -17 3,673 3,690 17
Projection of Public Spending at Current Prices (Calendar Year)
* Outturn
Public Investment
7
Government Consumption
• 2016: Government consumption is adjusted down slightly following Q2 outturn.
• 2017: Government consumption remains close to previously assessed.
Private investment is to grow slower than expected
• Private investment remains low following weak merchandise export figures.
• Expanded private consumption and service exports support investment in some sectors, e.g. telecommunications, energy, hotels, and retail sales.
• Clearer private partnership projects (PPP) would give supports to private investment beginning in 2017H2.
• Financing is not a major constraint for private investment.
Private Consumption, Private Investment, and Merchandise exports
8
Note: Real term and seasonally adjustedSource: Office of the National Economics and Social Development Board
80
90
100
110
120
130
2008 2009 2010 2011 2012 2013 2014 2015 2016
Private consumption
Private investment
Merchandise exports
Index, 4qma (2008Q1 = 100)
%YoY 2015*2016 2017
As of Jun 16
As of Sep 16
As of Jun 16
As of Sep 16
GDP Growth 2.8 3.1 3.2 3.2 3.2
- Private Consumption 2.1 1.8 2.7 2.1 2.1
- Private Investment -2.0 3.1 1.1 2.3 1.7
- Government Consumption 2.2 3.5 3.5 2.8 2.8
- Public Investment 29.8 10.1 9.7 5.2 7.5
- Exports of Goods and Services 0.2 2.2 1.7 0.9 1.0
- Imports of Goods and Services -0.4 -1.9 -2.7 2.4 2.2
Economic growth forecast for 2016 is revised up following strong private consumption growth, while projection for 2017 remains the same
9* Outturn
Note: Fan chart covers 90% of the probability distribution
GDP Growth Forecast
Annual percent change
10
2014 2015 2016 2017 2018
Downside Risks• Impact of Brexit, which could hinder the
recovery of global economy
• The effect of the government’s attempt to tackle zero-dollar tour operations on the number of tourists
• Private sector’s ability to cope with economic shocks
Upside Risks• Accelerated public spending
• Impact of government stimulus measures on the economy
Risks to growth projection skews more downwards
• Demand-side inflationary pressure remains the same.
• Cost-side inflationary pressure softens due to lower-than-expected oil prices.
• Headline inflation is expected to gradually increase and return to the target band in 2016H2.
Core inflation forecast remains the sameHeadline inflation forecast is adjusted downwards following oil prices
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Assumption on Dubai Oil Price
44 46 48 49 51 52 53 54
020406080
100120
2014 2015 2016 2017 2018
Jun 16Sep 16
USD/BarrelUSD/Barrel 2015* 2016 2017
As of Jun 16 50.8 43.1 53.0
As of Sep 16 50.8 41.0 50.0
Inflation Forecasts
2015* 2016 2017
Headline Inflation -0.9 0.3 2.0
(0.6) (2.2)
Core Inflation 1.1 0.8 1.0
(0.8) (1.0)
*Outturn, ( ) Monetary Policy Report, June 2016
Note: Fan chart covers 90% of the probability distribution
Headline Inflation Forecast
Annual percentage change
Core Inflation Forecast
12
Annual percentage change
Risks to inflation forecasts are skewed more downwards in tandem with the risks to economic growth
-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8
2014 2015 2016 2017 2018
Headline Inflation Target (2.5 ± 1.5)
-2
-1
0
1
2
3
4
-2
-1
0
1
2
3
4
2014 2015 2016 2017 2018
Monetary policy remains conducive to the economic recovery
13
On August 3 and September 14, 2016, the MPC voted unanimously to maintain the policy rate at 1.50 percent
The committee viewed that monetary policy should remain accommodative.The MPC stands ready to utilize an appropriate mix of available policy tools to provide support to the
economic recovery, while ensuring financial stability.
(1) Thai economy continues to recover, headline inflation is expected to return to the target band, and overall monetary conditions are accommodative and conducive to the economic recovery.
(2) There is a need to preserve policy space given greater uncertainties going forward from both domestic and foreign factors.
The MPC viewed that the baht’s appreciation against major trading partners’ currencies recently might not be beneficial to the ongoing economic recovery, and also monitored the risks to the financial stability, especially from search-for-yield behavior.
Key issues monitored by the MPC
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(1) Risks to global economic recovery, especially Brexit and uncertainties in the monetary policy divergence of major advanced economies which might increase volatility in the global financial market.
(2) Financial stability risks that stem from search-for-yield behavior under the prolonged low interest rate environment, especially increasing retail investment in risky financial assets.
*Outturn, ( ) Monetary Policy Report, June 2016
2015* 2016 2017
GDP Growth 2.8 3.2 3.2
(3.1) (3.2)
Headline Inflation -0.9 0.3 2.0
(0.6) (2.2)
Core Inflation 1.1 0.8 1.0
(0.8) (1.0)
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Forecast summary as of September 2017
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Website
https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/MPR/Pages/default.aspx
Forecasts in Monetary Policy Report as of September 2017
Note: * OutturnE = estimated
17
(%YoY) 2015* 2016E 2017E
GDP Growth 2.8 3.2 3.2
- Private Consumption 2.1 2.7 2.1
- Private Investment -2.0 1.1 1.7
- Government Consumption 2.2 3.5 2.8
- Public Investment 29.8 9.7 7.5
- Exports of Goods and Services 0.2 1.7 1.0
- Imports of Goods and Services -0.4 -2.7 2.2
Current Account Balance (Billion USD) 32.0 40.4 31.8
- Value of Merchandise Exports -5.6 -2.5 -0.5
- Value of Merchandise Imports -11.3 -6.6 5.6
Attachment
2015*2016 2017
Jun 16 Sep 16 Jun 16 Sep 16
Dubai oil price (USD per barrel) 50.8 43.1 41.0 53.0 50.0
Non-fuel commodity prices (%yoy) -17.5 -5.5 -2.8 2.6 3.2
Fresh food prices (%yoy) -4.3 3.0 5.5 3.7 1.2
Public expenditure (calendar year)
Government Consumption (billion baht)1/ 2,334 2,482 2,474 2,637 2,637
Public investment (billion baht)1/ 864 955 946 1,035 1,054
Fed funds rate (% year end) 0.38 0.63 0.63 1.38 1.13
Trading partners’ GDP growth (%yoy) 3.2 3.0 2.9 3.3 3.1Regional currencies per USD (excl RMB)** 150.7 154.4 153.3 157.2 156.3
Forecast assumptions
Note: * Outturn** Higher value indicates currency depreciation against the USD1/ Includes spending on the Water Management and Infrastructure Investment plans
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Attachment
(% YoY)Weight
(%)2015*
2016 2017
Jun 16 Sep 16 Jun 16 Sep 16
US 14.9 2.4 1.9 1.5 2.3 2.2
UK 2.5 2.3 1.8 1.6 2.2 0.6
Euro area 10.0 1.6 1.7 1.6 1.6 1.2
Japan 13.6 0.6 0.6 0.5 1.0 0.9
China 15.7 6.9 6.5 6.5 6.4 6.3
Asia** 37.4 3.5 3.2 3.2 3.7 3.5
Total*** 100 3.2 3.0 2.9 3.3 3.1
Assumption on trading partners’ GDP growth
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Note: * Outturn** Weighted by shares of Thailand’s major trading partners in 2014 (7 Asian countries including Singapore (6.5%),
Hong Kong (7.9%), Malaysia (8.0%), Taiwan (2.5%), Indonesia (5.9%), South Korea (2.8%), and Philippines (3.7%))*** Weighted by shares of Thailand’s major trading partners in 2014 (13 countries). The table excludes other countries with
small trade shares.
Attachment
