thailand economic outlook - hmc polymers · imf world economic outlook apr 2016. 23 2.8 2.8 2.8 3.3...
TRANSCRIPT
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Thailand Economic Outlook
May 2016
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Thailand’s economic growth has been below trend due to various factors
• Coup in 2006
• US subprime crisis
in 2008-2009
• Eurozone debt crisis
in late 2009
• Japan’s tsunami
and Thailand’s great
floods in 2011
• Coup in 2014
0
2
4
6
8
10
12
0 10,000 20,000 30,000 40,000 50,000 60,000
10-Y
ear
Avg
. G
row
th R
ate
(%
)
GDP Per Capita (USD)
China
Singapore
USJapan
Eurozone
S.Korea
Malaysia
Thailand
Philippines
Indonesia
Source: IMF, KResearch
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2H20162H2016 20172017
• Brexit (?)
• Donald Trump (?)• China
• Referendum on the Draft Constitution
• Brexit (?)
• Donald Trump (?)
• China• The Fed raising rates
• General Election & Politics
Global Events
Domestic Events
Key events to affect the Thai economic outlook
• High Household Debts, Labor Shortage & Aging Population …..Long-term Issues
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The Thai Economy
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1Q2016 GDP growth improved to 3.2% YoY, up from 3.0% in 4Q2015
• March exports grew 1.3% YoY, continuing the positive trend from the
10.3% jump in February
• Imports fell 6.9% YoY, moderating from the 16.8% drop in February
• Foreign tourists rose 15.6% YoY in March, continuing from the16.0%
increase in February
• Domestic car sales dropped 2.3% YoY, moderating from the 10.7% fall in
February
• Thai Industrial Sentiment Index improved to 86.7 in March, reversing the
downward trend seen in the previous two months
• Agricultural price index fell 1.7% YoY in March, moderating from the 7.5% contraction in February
In addition to the higher GDP growth in Q1,
Thai economic indicators show signs of bottoming
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Excluding gold and oil, March exports rose 0.5% YoY
Units: %YoY 2015 2016
Jan Feb Mar YTD
Total Exports -5.8 -8.9 10.3 1.3 0.9
ex. gold -6.3 -7.7 0.2 -1.1 -2.7
ex. gold & oil -5.0 -6.3 1.5 0.5 -1.4
U.S. 0.7 -8.5 0.3 -1.4 -3.2
China -5.4 -6.1 -7.6 -5.4 -6.4
EU 28 -6.0 -2.0 4.6 -1.8 0.2
Japan -7.7 -10.1 34.8 -6.1 5.7
ASEAN 5 -15.1 -14.9 31.8 12.4 9.1
CLMV 7.7 1.2 -5.8 -6.9 -4.0
• Gold 262.5% YoY
• Rice 7.3% YoY
• Auto & Parts 2.9% YoY
• IC 2.2% YoY
Top Performers in March
Source: Ministry of Commerce
• Rubber -21.1% YoY
• Tapioca Products
-12.6 % YoY
• Refined fuels
-51.5% YoY
Top Draggers
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The government budget disbursement continues to provide
a much needed push to the economy
50.955.1
31.9
51.456.1
27.8
0
10
20
30
40
50
60
% Disbursement rate
Government Budget Disbursement
6M-FY2016 6M-FY2015
TotalBudget
CurrentBudget
InvestmentBudget
Source: FPO, KResearch
+38.3% YoY
+3.5% YoY
+6.6% YoY
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Motorways
THB 160 bn
Mass Transit System
THB 397 bn
Dual Track Railways
(1.0 m width)
THB 118 bn
Air & Marine Transportation
THB 54 bn
Dual Track Railways
(1.435 m width)
THB 1,066 bn
Infrastructure Investment Projects (Urgent Phase) starting in 2016-2017
aimed at facilitating economic growth and development
Total: THB1.796 tr
• By end-2016 : THB 297.6 bn
• By end-2017 : THB 257.8 bn
• 2018 onward : THB 1,241 bn
Investment Time Frame
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If not approved, the NCPO may submit another draft without holding a referendum
7 August 2016
General election to
be held by end-
2017 regardless of
the referendum result
The Constitution Drafting Committee has finished drafting the new charter
A referendum will be held
Drafting of organic laws associated with the new charter and the coming election
Thailand’s key political timeline
If approved, the draft charter will be submitted to HMK for royal endorsement
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Global Economy
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China’s high debts pose risks to the economy
282269
258
% of GDP
Source: McKinsey
Moody's estimated that liabilities worth 20% to 25% of GDP could potentially require restructuring
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• April’s manufacturing PMI turned
out below expectations
• Exports were also lower than expected
China
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Units: % YoY Apr 2016 Consensus
Forecast
Mar 2016
Industrial Production 6.0 6.5 6.8
Retail Sales 10.1 10.5 10.5
Fixed Asset Investment
(YTD)
10.5 10.9 10.7
Yuan Loans 14.4 14.8 14.7
China economy continues to slow
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• Non-farm payrolls were lower
than expectation in April, in
line with the cooling GDP
growth (0.5% QoQ annualized from 1.4% in 4Q2015)
U.S.
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U.S. Manufacturing PMI • Manufacturing PMI remains
weak, due to impact of soft oil
prices on oil and gas
production. Industries have
also been hurt by the weak
global economy
• The Fed signals no rush to raise rates
U.S.
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• Going forward, the U.S.
economic momentum will
depend on the strength of
consumer spending following
the improved labor market
condition
• If all goes well, the U.S. GDP
growth is expected to pick up
the pace in the second half of
the year
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Euro Area Manufacturing PMI• Euro Area GDP growth slowed to
1.5% YoY in 1Q2016
• The ECB made no change to
policy at its April meeting, as
expected
• But President Mario Draghi
indicated that the ECB will keep
the door open for more stimulus if necessary
Euro Area
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Japan Manufacturing PMI • Japan manufacturing PMI
shows contraction in
industrial activities for the
second consecutive month,
due to the drop in exports
and the strong yen
• The BOJ disappoints the
market by keeping policy
rate steady in its April
meeting
Japan
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• Japan’s Core Inflation fell
0.3% over year in March,
while the Head Line
inflation dropped 0.1%.
Both were below market
expectations.
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The BOJ is most likely to ease more;
the ECB will follow if inflation expectation does not improve
GDP Growth (YoY)
Core Inflation Inflation
Expectation*
Policy Rate
U.S. 2.0% (Q4-2015) 2.2% (Mar-2015) 1.65% 0.25-0.50% (Fed Funds Rate)
Euro Zone 1.6% (Q4-2015) 0.7% (Apr-2015) 1.03%** -0.4% (Deposit Facility Rate)
Japan 0.7% (Q4-2015) -0.3% (May-2015) 0.31% -0.1% (Policy Rate Balance)
* implied from 10-year bond yields
** Germany’s
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2016 Growth Forecasts
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IMF has recently cut the global growth outlook
Units: % YoY 2015 2016 2017 Difference from the Previous Forecast
2016 2017
World 3.1 3.2 3.5 -0.2 -0.1
U.S. 2.4 2.4 2.5 -0.2 -0.1
Euro Area 1.6 1.5 1.6 -0.2 -0.1
Japan 0.5 0.5 -0.1 -0.5 -0.4
China 6.9 6.5 6.2 0.2 0.2
Oil -47.2 -31.6 17.9 -14.0 3.0
Non-FuelCommodities
-17.5 -9.4 -0.7 0.1 -1.1
IMF World Economic Outlook Apr 2016
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2.8 2.8 2.83.3
0.00.51.01.52.02.53.03.5
1H15 2H15 1H16f 2H16f
Progress of government investment projects is expected to be more evident in 2H16
Source: NESDB, and KResearch Forecast
2016 outlook to improve in 2H
% YoY
Possible projects kickoff
• New mass transit & dual-track rail systems
• Suvarnabhumi Phase 2
• New motorways• Broadband
• Small investment projects
• Tumbon-level projects
% YoY
Carried over projects
Better-than expected inbound tourists will be another boost
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Unit : % YoY 20152016
NESDB BOT KResearch
Real GDP 2.8 3.0-3.5 3.1 3.0
Private Consumption 2.1 2.3 1.8 1.9
Private Investment -2.0 2.1 2.4 2.3
Public Investment 29.8 11.7 10.7 11.5
Exports -5.8 -1.7 -2.0 0.0
Headline CPI -0.9 0.1-0.6 0.6 0.4
Thailand’s Economic Growth Forecast 2016
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Business Outlook in 2H2016
%Growth YoY 2015 1H/2016 2H/2016 2016
Domestic Cement Sales -0.8 1.1-2.2 3.0-6.0 2.0-4.0
No. of Foreign Tourists 20.4 11.6-12.6 9.3-11.4 10.4-12.0
Revenue of Listed Private Hospitals 11.6 9.0-11.0 10.0-14.0 10.0-12.0
Export Volume of Automobiles 6.8 2.0-5.0 3.0-9.0 0.0-5.0
Domestic Car Sales -9.3 -8.0 to -5.0 -13.0 to -9.0 -11.0 to -7.0
Modern Trade Market Value 2.8 2.6-2.8 2.8-3.1 2.7-3.0
Export Value of Rice -15.2 2.0-8.0 -12.0 to -8.0 -5.0 to -4.0
Export Value of Rubber -16.0 -6.0 to -2.0 -12.0 to -4.0 -13.0 to -9.0
Export Value of Tapioca Products -1.6 -8.0 to -3.0 -6.0 to -4.0 -9.0 to -6.0
Forecasted by KResearch (As of May 13, 2016)
• In 2H2016, construction, healthcare, retail trade businesses will likely register improving growth along with the overall economy
• Meanwhile, tourism-related business is expected to maintain promising growth
• On the other hand, sectors related to agriculture products and sales of durable goods may still be under pressure
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Mid to Long-Term Issues
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Thailand’s debt-to-GDP ratio has been rising
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By the year 2020 ...
• Household Debt to GDP is expected to rise to 88% from
81.5% at the end of 2015
• Household Debt Service Ratio will be near 40% from 27.2% *
* 2013 according to the National Statistical Office
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Free Trade Framework … AEC , TPP and RCEP
Malaysia
Indonesia
AEC
TPP
Singapore
Vietnam
Brunei
Philippines
Thailand
Myanmar
Cambodia
Lao PDR
Canada
Mexico
US
Peru
Chile
Japan
New
Zealand
AustraliaSouth Korea
India
China
RCEP37% of world’s GDP
25% of world’s trade
12% of world’s population
29% of world’s GDP
40% of world’s trade
50% of world’s population
Trans-Pacific Partnership Regional Comprehensive Economic Partnership
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From ASEAN+1 FTAs To RCEP
Progress in negotiation
Eliminate import tariff on 65% of products traded within
RCEP countries (around 8,000-9,000 items)
Gradually reduce tariff on another 20% of products within
10 years
The remainder of 15%, mostly categorized into a sensitive
list are subject to further negotiation.
1
2
3
Negotiation extended to be finalized within 2016 …
and the agreement to be effective in 2017
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TPP…Increasing US Roles in Asia Pacific
o The agreement involves greater liberalization
and cover trade, services, investment and
intellectual property.
o Liberalization of trade in goods will see more
than 11,000 tariff lines subject to 0% tariff
rate.
o There will be liberalization in service and
investment as well as reduced restrictions
among member countries.
2015201520152015: Negotiation among 12 member : Negotiation among 12 member : Negotiation among 12 member : Negotiation among 12 member countries were finalized October 5, 2010.countries were finalized October 5, 2010.countries were finalized October 5, 2010.countries were finalized October 5, 2010.
2005: Implemented first with Brunei, Chile, New Zealand and Singapore under the Trans-Pacific Strategic Economic Partnership (TPSEP)2008:US taking part in negotiation in February while Australia, Vietnam and Peru joining the talk in November
2010: Malaysia taking part in negotiation2012: Canada and Mexico taking part in negotiation 2013: Japan taking part in negotiation
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RCEP vs. TPP
RCEP Regional Comprehensive Economic Partnership
TPPTrans-Pacific Partnership
Economic size
29% of world’s GDP
40% of world’s trade
50% of world’s population
55.6% of Thai exports
37% of world’s GDP
25% of world’s trade
12% of world’s population
41.3% of Thai exports
Trade
• The main target is to eliminate tariffs on
all import items as the agreement
focuses on trade in goods
• The target is to eliminate tariffs on all import
items, with the US being a major consuming
country
Service sector
liberalization• Unclear, positive list likely to be adopted • Negative list adopted
Investment • Unclear• The target is to allow foreign investors to hold
100 percent of shares
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Aging Society
Thailand is becoming a Super-Aged Society
26.4
21.4
14.7
10.49.5
6.85.5
30.7
28.2
20.1 19.5
16.2
12.9
8.2
0
5
10
15
20
25
30
35
Japan Germany U.S. Thailand China Vietnam India
2015
2020
2025
2030
% of population aged 65 or higher
By 2030, India will outgrow China
in term of population
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