1

2

Thailand’s growth has been bumpy and lower since 2008

Source: EIC analysis based on data from NESDB

Real GDP Growth

-15

-10

-5

0

5

10

15

Asian financial crisis

2011 flood

Average growth 2000-2007

5.1%

Average growth 1986-1999

6.7%

Average growth 2008-2013

2.9%

Global financial crisis

(% YOY)

Where are we heading

next?

3

0

20

40

60

80

100

120

140

4Q

19

81

1Q

19

84

2Q

19

86

3Q

19

88

4Q

19

90

1Q

19

93

2Q

19

95

3Q

19

97

4Q

19

99

1Q

20

02

2Q

20

04

3Q

20

06

4Q

20

08

1Q

20

11

2Q

20

13

Source: EIC analysis based on data from Bloomberg

The sharp contraction of oil prices is not new..

Dubai oil price (USD/bbl)

The oil dynamics is changing. Will it bring down another empire?

..but, this time, it has brought a new market dynamics with mixed consequences

Oil is now unlikely to be scarce 1

The oil cartel has become ineffective 2

Boost to global economy will be offset by weak demand

3

The cheap oil will expose Thailand’s sharply bifurcated economy

4

The oil price tumble means more than just cheap oil

1980s Oil Glut

Asian financial crisis

Global credit crunch

4

Divergence among advanced economies add more uncertainties to the global economy

Source: EIC analysis based on data from Bank of Thailand

Actions by selected central banks since 2014H2

Japan: continue QQE indefinitely

Korea: cut interest rate

India: cut interest rate

China: cut interest rate Eurozone: introduce

sovereign QE

Swiss: cut interest rate

Denmark: Cut interest rate Thailand

USD

EUR

JPY

MYR

KRW

IDR

How much baht a foreign currency can buy

30/6/14 26/1/15 %Change

Appreciation Depreciation

US: Terminate QE and potentially raise interest

rate by end of 2015

32.8 32.5 0.9

44.9 36.7 18.3

0.33 0.28 15.1

10.4 9.2 11.5

0.032 0.030 0.6

0.0030 0.0028 0.7

Singapore: reduce trading band slope

5

What is Thailand’s new normal of growth?

6

Note: Working population is defined as those aged 15-65. Source: EIC analysis based on data from World Bank, NSO, and US Census

Forecast of working-age population in select ASEAN countries (Index: 2010=1)

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060

2065

2070

2075

2080

2085

2090

2095

2100

Peaks in 2018

Peaks in 2063

Peaks in 2077

Peaks in 2036

Thailand will no longer get an economic boost from having a young workforce

Our demographic picture is much worse than other ASEAN competitors

Malaysia

Thailand

Indonesia

Philippines

7

Source: EIC analysis based on EIC survey and LFS

Unit: Percent of all firms surveyed

13

22

23

27

47

56

Unattractive workconditions

Unattractive locations

Labor relocation

Industry switching

Skill mismatch

High labor demand

EIC Survey: Why is your business facing shortage of labor?

In addition to labor being scarce, there is also a serious skill mismatch in our labor market

Salary by education levels (2003 vs.2013)

Unit: Index (No education = 100)

100

155

209

322

611

126 158

196

381

No education

Lower secondary

Upper secondary

Vocational University

2003

2013

8

173

146

189

130

83

0

20

40

60

80

100

120

140

160

180

200

Source: EIC analysis using data from World Bank.

Thailand’s real investment is still below its pre-Asian-Financial-Crisis level

Real investment (Index: 1996=100)

Malaysia

Thailand

Indonesia

Philippines

South Korea

Thailand has been underinvesting in the past two decades

9

Thailand Malaysia Japan US

In 1 man-day

Thailand lags behind in terms of labor productivity

10

Potential GDP growth and its contributions

Unit: %

Given Thailand’s bad cards, the outlook on growth potential is quite discouraging

Source: EIC analysis based on data from NESDB, LFS, and Barro-Lee dataset.

0.8 0.7

1.0 1.4

1.5 1.8

Status Quo

3.0

0.1

1.4

2008-2013

3.5

1.5

2000-2007

5.2

3.3

0.1

3.5

1.7

Baseline

2014-2020

Productivity

Capital

Employment

11

Improve Logistics

Facilitate Tourism

Strengthen Thailand as a CLMV Hub 1

2 3

What can we do to help uplift our new normal 3.5% growth?

12

Infrastructure investment needs to be complemented with better software

12% 10%

34% 27%

30% 41%

24% 23%

100%

Labor

Others

Domestic parts

Imported parts

Electronics Autos

Better logistics gives us a chance to lure world class

technology manufacturers..

Unit: % of Total Cost

Source: EIC analysis based on data from ERIA, IMD

Labor accounts for just around 10% of

total cost

Supply chain management plays an important role

..but we still have to take care of the

software issues

Custom clearing efficiency (score)

4.04 4.76 6.08 6.29

8.09 8.37

5.78 6.55 7.77 8.16

8.90 8.98

Logistic management efficiency (score)

13

Source: EIC analysis based on data from TAT

By tapping the elderly, Thailand will attract tourists who have lower carbon footprint and higher per capita spending

With the world aging fast, Thailand has to capture the elderly tourists

Boost in tourism revenue came mainly from the increase in the number of tourists

17,248

6,531 1,356

2013 Revenue

39,283

14,148

2007 Revenue

A

B C

Rather than celebrating record arrivals, we must shift focus towards quality and sustainability of our tourism sector

Slightly higher expense per day

Similar length of stay

High growth in number of visitors

Unit: Million dollars

7.8 9.6

16.8

2010 2050 2030

Share of global population aging 65+ (%)

Thailand’s share of tourist aging 65+ (%)

2.1

3.9

2011 2007

14

Integration with CLMV, in itself, will not be enough to make Thailand an International HQ

..but, to capture this trend, we need amenities that are up to international standard

Source: EIC analysis based on data from MOL

We are witnessing the rise of expats in Thailand..

0.2

1.2

2008 2009 2010 2011 2012 2013

Total number of expats in Thailand (million people)

SCB EIC