Pipat Luengnaruemitchai

December 2019

ที่มา:
Phatra Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Refer to important disclosures at the back of this report.

1 A member of the
Kiatnakin Phatra Financial Group
Global growth: “The Eye of the Storm”
GDP growth 2018 2019F 2020F 2021F
 2020 is another weak year. Key DMs are set to Global 3.8 3.1 3.2 3.4
slow. Stable global growth depends on a rebound
in EM Developed Market 2.2 1.6 1.3 1.4
Emerging Market 4.8 4.0 4.3 4.6
 Global growth should bottom by the spring as
trade war concerns ease and the lagged impact Emerging Asia 6.1 5.3 5.4 5.5
of policy easing kicks in. Latin America 1.6 0.8 1.6 2.8
 Trade and tech war: De-escalation in election
year…But longer-term issues linger. US 2.9 2.3 1.7 1.7
 US election is the key focus in 2020 Euro 1.9 1.2 1.0 1.1
 Key downside risks: trade war re-escalate, Japan 0.8 0.9 0.3 1.1
slowing Chinese economy and Brexit negotiation China 6.6 6.1 5.6 5.5
% GDP growth yoy
8.0
2018 2019 2020
6.0
4.0
2.0
0.0
-2.0
-4.0

China

South Africa
Saudi Arabia
US

Japan

Argentina
India
Euro area

Russia
Turkey
Brazil
Mexico
Source: BofA Merrill Lynch Global Research

2
 ASEAN 2020 outlook:
Not great, but not getting worse either

Source: BofA Merrill Lynch Global Research estimates, CEIC

Thailand: Where is the growth engine?

% YoY 2018 2019E 2020E 2021E

Real GDP 4.1 2.6 2.8 3.1
Private consumption 4.6 4.2 3.0 3.1
Government consumption 1.8 2.0 3.0 3.0
Gross fixed investment 3.8 2.2 3.5 4.8
Private 3.9 2.7 2.7 4.0
Public 3.3 2.0 5.8 7.0
Headline CPI 1.1 0.7 0.9 1.0
Exports 7.5 -2.2 1.0 2.5
Imports 13.7 -3.8 2.5 4.1
Current account (US$ bn) 28.5 34.6 31.5 29.5
as % of GDP 5.6 6.3 5.4 4.7
Policy rate 1.75 1.25 1.00 1.25

Source: Phatra Securities

4
 Factories have adjusted to sapping demand by allowing fewer
overtime hours and, increasingly, by laying off workers

Unemployment claims under Social Security Fund tested The number of manufacturing workers doing overtime shifts
the level seen in 2009 amid the Global Financial Crisis has dropped to below 1.5M

Unemployment claims against Social Security Fund Manufacturing workers with more than 50 hours worked/week
Unit: persons, SA Unit: persons, SA, 6mma
Unemployment claims, SA
200000 Claims to total registrations (RHS,%) 2.5% 2,300,000

180000 2,200,000
160000 2.0% 2,100,000
140000
2,000,000
120000 1.5%
1,900,000
100000
1,800,000
80000 1.0%
1,700,000
60000
40000 0.5% 1,600,000

20000 1,500,000
0 0.0% 1,400,000
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jul-04

Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19

02/2016
06/2011
01/2012
08/2012
03/2013
10/2013
05/2014
12/2014
07/2015

09/2016
04/2017
11/2017
06/2018
01/2019
08/2019
Source: Phatra Securities, SSO, LFS

5
 80
85
95

90
100
105
110
115
125
130

120
Jun-16
Jul-16
Aug-16

Source BIS, Phatra Securities

Sep-16
Oct-16
Nov-16
Dec-16
THB
Jan-17
Feb-17
Mar-17
Apr-17
USD

May-17
Jun-17
Jul-17
EUR

Aug-17
Sep-17
Oct-17
Nov-17
JPY

Dec-17
Jan-18
Feb-18
CHF

Mar-18
Apr-18
May-18
Jun-18
KRW

Jul-18
Aug-18
Sep-18
Oct-18
SGD

Nov-18
Dec-18
Jan-19
CNY
THB appreciated by 20% in NEER over the past three years

Feb-19
Mar-19
THB outperformed the other currencies in NEER term

Apr-19
May-19
GBP

Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
6
 80
90

70
100
120
130
140

110

Source : Bloomberg
Feb-95
Dec-95
Oct-96
Aug-97
Jun-98
Apr-99
Back to pre-1997

Feb-00
Dec-00
Oct-01
Aug-02
Jun-03
Apr-04
Feb-05
Dec-05
Oct-06
Aug-07
Jun-08
Apr-09
Feb-10
Dec-10
Oct-11
Aug-12
REER

Jun-13
Apr-14
THB NEER and REER are back to pre-1997 levels

Feb-15
Dec-15
NEER

Oct-16
Aug-17
Jun-18
Apr-19
7
THB appreciation: A structural problem?

In 2019, Baht REER has appreciated by 6.7% so far but CAS has remained large
Service Balance Trade Balance Current account Capital account
15,000

10,000

5,000

(5,000)

(10,000)

(15,000)
1Q2006

3Q2006

1Q2007

3Q2007

1Q2008

3Q2008

1Q2009

3Q2009

1Q2010

3Q2010

1Q2011

3Q2011

1Q2012

3Q2012

1Q2013

3Q2013

1Q2014

3Q2014

1Q2015

3Q2015

1Q2016

3Q2016

1Q2017

3Q2017

1Q2018

3Q2018

1Q2019

3Q2019
Source : BoT, Phatra Securities
The other side of CA surplus: A Saving-Investment Gap

Widening S-I gap = sluggish investment + rising savings Sharp rise in corporate savings
6,000,000 Saving - Investment Gap Bn Bt
4,000

Thousands
3,500
5,000,000
S-I
3,000
4,000,000 Saving 2,500
Investment 2,000
3,000,000
1,500
1,000
2,000,000
500
1,000,000 0
-500

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0

-1,000,000 Household Public sector Corporate

Source : NESDB Source : NESDB

The fall in private consumption and private investment is the main contributors to widening S-I gap

9
Inflation and policy rate

Inflation remains below targets Real policy rate

%YoY %yoy
5.0 2.5

4.0 2.0
3.0
1.5
2.0
1.0
1.0
0.0 0.5
-1.0 0.0

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Apr-14
Jul-14
Oct-14

Apr-15
Jul-15
Oct-15

Apr-16
Jul-16
Oct-16

Apr-17
Jul-17
Oct-17

Apr-18
Jul-18
Oct-18

Apr-19
Jul-19
Oct-19
-2.0
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Headline CPI Core CPI Real policy rate (minus core CPI) Policy rate

Source: MoC, BoT, Phatra Securities Source: BoT, Phatra Securities

10
Fiscal policy not active in managing the downturn in Thailand

Decomposition of Thailand’s fiscal balance 2009

4 0.0
-1.0
Cyclical component -2.0
3
Cyclically Adjusted Primary Balance -3.0
Interest Payment -4.0
2 -5.0
Overall Balance
-6.0
-7.0
1 -8.0
-9.0
0 -10.0
Thailand Advanced Emerging
Economy Market
-1

-2 2019
1.0
-3 0.0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019F

2020F
-1.0
-2.0
-3.0
-4.0
1. The overall balance has been close to zero in recent years -5.0
2. Small role of fiscal ‘automatic stabilizers’ (cyclical component) -6.0
 Low tax coverage and progressivity Thailand Advanced Emerging
Economy Market
 Limited unemployment benefits
3. ‘Discretionary’ balance in surplus, implying contractionary stance
Source: KKI analysis based on IMF’s Fiscal Monitor Database

11
Fiscal space?

Public debt to GDP (%) Budgetary fiscal deficits have been small
104.1
1200 9.0%
Budgetary deficit Additional deficit % GDP % GDP (additional)
8.0%
1000
Debt ceiling at 60% 7.0%

53.8 800 6.0%

Billion Baht

% GDP
41.9 42.1 42.4 43.0 43.8 44.3 44.6 45.0 5.0%
4.1%
600 3.5% 3.5%
4.0%
2.9% 2.7% 2.6% 2.6%
2.5% 2.5% 2.6%
400 2.0% 2.0% 3.0%
1.7% 1.8%
2.0%
200
1.0%
2017 2018 2019 2020 2021 2022 2023 2024 AE EM
2019 2019 0 0.0%
Thailand 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: FPO, calculated by KKI

12
Foreign investors have been selling down Thai equity

400,000
300,000
200,000 Stock Bond

100,000
0
-100,000
-200,000
-300,000
-400,000
-500,000
Jun-15

Jun-16

Jun-17

Jun-18

Jun-19
Dec-14

Dec-15

Dec-16

Dec-17

Dec-18
Source: Bloomberg, SET, ThaiBMA 13