1/17

2/17

• Economic growths in 2016 and 2017 remain close to the previous assessment. Better-than-expected merchandise exports and private consumption compensate for weaker-than-expected exports of services and private investment.

• Headline inflation is projected to gradually rise and return to target band within Q1/2017, but is lower compared to previous assessment due to lower fresh food price.

Key developments and outlook

2015* 2016 2017

GDP growth 2.8 3.2 3.2

(3.2) (3.2)Headline inflation -0.9 0.2 1.5

(0.3) (2.0)Core inflation 1.1 0.7 0.8

(0.8) (1.0)

* Outturn, ( ) Monetary Policy Report, September 2016

• Risks to growth and inflation increase and tilt more downward, due mainly to the potentially slower-than-expected recovery of the global economy, uncertainty from US economic policy, as well as the number of Chinese tourists that might be lower than assessed.

• Monetary policy is conducive to economic recovery and is appropriate to ensure financial stability.

3/17

Trading partners’ economic forecast remains unchanged,but faces increased uncertainty and more downside risks

• G3: the US continues to recover, while Japan and the Euro area experience moderate growth.

• China faces decelerating growth due to ongoing economic reforms to foster macroeconomic stability.

• Asia shows slow recovery, affected by uncertainty from US trade policy.

Risks tilt downward with increased uncertainty from unclear economic policies of the incoming US government, while upside risks include the impact of the US’ stimulating fiscal measures that could induce more investments.

Monetary policy

Risks to trading partners’ economy

BOJ and ECB: continue their accommodative monetary policy

Fed: expected to increase the pace of rate hikes

60

70

80

90

100

110

120

130

Jan2014

Jul Jan2015

Jul Jan2016

Jul

Taiwan South Korea Malaysia (Oct)Singapore Indonesia Philippines (Oct)

Index, 3 mma sa (Jan 2014 = 100)

Merchandise export value of Asian countries

Nov 16

4/17

Increased uncertainty in oil price

Oil price adjusts up along with increased uncertainty

0

20

40

60

80

100

120

2557 2558 2559 2560 2561

Sep 16Dec 16

USD/Barrel

• Crude oil price increases faster than expected following the oil producers’ agreement to cut production.

• Looking forward, the increased oil price would induce more shale oil production and help curb the oil price increase.

USD/Barrel 2015* 2016 2017

As of Sep 1650.8

41.0 50.0

As of Dec 16 41.4 53.5

Oil price projection

* Outturn

• Oil producers’ ability to adhere to the agreed production cut (implementation risk)

• Uncertainty in US energy policy

Dubai oil price assumption

5/17

Merchandise export value projection is revised upbut continues to face pressure from structural factors

and trading partners’ slow recovery

• Export value projection increases for products whose prices correlate with oil price.

• Export value projection improve in some industries that see shifts in production base and growing foreign demand, especially electrical appliances, electronics, and automotive.

• Exports of other industries expected to slowly recover due to hindrance from structural factors and moderate trading partners’ demand.

8090

100110120130140

Jan2014

Jul Jan2015

Jul Jan2016

Jul

Electrical Appliance AutomotiveElectronics and HDD Rubber

Index (2001 = 100)

Sources: BOT and Office of Industrial Economics

% YoY 2015* 2016 2017

As of Sep 16-5.6

-2.5 -0.5

As of Dec 16 -0.6 0.0

Merchandise export value projection

* Outturn

Maximum capacity by sector

Oct 16

6/17

Private consumption gains supports from

• Higher farm income in terms of price and quantity, even though still lower than past average

• Better merchandise exports

• Lower debt service as auto loans from First Car Scheme end

• Government’s stimulus measures, which partly is an intertemporal consumption shifting measure

Private consumption grows more than expectedpartly due to the good Q3/2016 outturn

708090

100110120

Jan2014

Jul Jan2015

Jul Jan2016

Jul

Farm incomeFarm income, 3 mmaAverage non-farm income, 3 mma

Index, sa (Jan 2014 = 100)

Sources: National Statistical Office and Office of Agricultural Economics

Real farm and non-farm income

Oct 16

7/17

Tourism sector that slowed down in Q4/2016 will recover in 2017, partly with the support of the government’s tourism measures and clearer policy direction ahead.

Exports of service growth is lower than expectedfollowing the number of tourists that has been adjusted down

• Government’s measure to curb illegitimate tour operators has reduced Chinese tourists more than previously thought.

• Number of tourists expected to slow down temporarily during mourning period.

Millions 2015* 2016 2017

As of Sep 1629.8

33.6 36.3

As of Dec 16 32.4 34.1

Foreign tourists projection

* Outturn

050

100150200250300

Jan2014

Jul Jan2015

Jul Jan2016

Jul

Total China (27%)Malaysia (11%) Other Asia (28%)Europe exc. Russia (16%) Russia (3%)

Index, sa (Jan 2014 = 100)

Note: ( ) share of total number of touristsSource: Department of Tourism

Number of foreign tourists

2017

Oct 16

8/17

Private investment gains support from government’s stimulusbut remains moderate and concentrated in only some sectors

Private consumption, private investment, and merchandise export volume

Value of BOI’s promotion certificates issued

• Overall private investment remains moderate, in line with subdued merchandise exports, slowdown in exports of services, and increased uncertainty in domestic and global economy.

• Private investment is concentrated in service and utility sectors, e.g. retails and telecommunications, from the growing demand in those sectors.

• Public-private partnership and government stimulus projects are important contributors to growth in 2017.

80

90

100

110

120

130

2008 2009 2010 2011 2012 2013 2014 2015 2016

Private consumptionPrivate investmentMerchandise export volume

Index, 4qma sa (Q1/08 = 100)

Sources: National Economic and Social Development Board, calculated by BOT

0 100 200 300

Services and utility

Machinery and equipment

Electrical appliance and electronics

Agriculture

Chemicals and plastic

Mining and metals

Light industry

201420152016

Source: Board of InvestmentBillion baht

Q3/16

9/17

Government spending continues to be a driving forceof the economy. Although 2016 growth is lower than expected,

2017 growth is forecasted to be higher from government’s additional projects.

Public investmentGovernment consumption

• 2016: slightly lower than expected from delays in SOE investment

• 2017: revised up with support from government’s additional projects1 along with ongoing infrastructure projects

• Outturn in Q3/2016 is lower than expected due to low disbursement rate

• Transfers towards social welfare expected to be lower due to privatization of healthcare services in order to increase healthcare efficiency

1 Additional projects include Matching Fund project (September 13, 2016) and stimulus project (December 7, 2016)

% YoY 2015*2016 2017

As of Sep 16 As of Dec 16 As of Sep 16 As of Dec 16

Consumption 4.4 6.0 3.1 6.6 5.9

Investment 25.7 9.4 8.5 11.4 16.1

Total 9.4 6.9 4.5 7.9 8.7

* Outturn

Public spending projection at current prices (calendar year)

10/17

Economic growth in 2016 and 2017 remains close to previous assessmentwith some changes in the growth driver

% YoY 2015*2016 2017

As of Sep 16 As of Dec 16 As of Sep 16 As of Dec 16

GDP Growth 2.8 3.2 3.2 3.2 3.2

- Private consumption 2.1 2.7 3.1 2.1 2.6

- Private investment -2.0 1.1 -0.6 1.7 1.6

- Government consumption 2.2 3.5 1.1 2.8 3.2

- Public investment 29.8 9.7 9.3 7.5 11.9

- Exports of goods and services 0.2 1.7 1.9 1.0 0.6

- Imports of goods and services -0.4 -2.7 -2.3 2.2 2.4

* Outturn

11/17

Uncertainty and downside risk increase

Downside risks

• Trading partners’ growth might be lower due to uncertainty from US trade policy and financial risks in China

• Number of tourists might be lower as a result of measures to curb illegal tour operators

Upside risks

• Effect of government’s stimulus measures might be larger

• Effect of US fiscal stimulus that could lead to higher growth in the US

GDP growth forecast

Note: Fan chart covers 90% of the probability distribution

12/17

Headline and core inflation forecasts are revised downdue to lower cost of production

• Demand-side inflationary pressure remains the same

• Cost-side inflationary pressure lower than expected, from rapid downward adjustment of fresh food price as the drought eased up that outweighs increase in energy prices

• Headline inflation expected to return to the inflation target band in Q1/2017

2015* 2016 2017

Headline inflation -0.9 0.2 1.5

(0.3) (2.0)Core inflation 1.1 0.7 0.8

(0.8) (1.0)

Inflation projections

* Outturn, ( ) Monetary Policy Report, September 2016

High raw food price due to drought

-3-2-10123

Jan2014

Jul Jan2015

Jul Jan2016

Jul

Raw food price (15.51%) Energy price (11.40%)Core inflation (73.09%) Headline inflation

% YoY

Source: Ministry of Commerce, calculated by BOT

Contribution to headline inflation

Nov 16

13/17

Risks to inflation forecasts skew more downwardfollowing risks to economic growth

Core inflation forecast

Note: Fan chart covers 90% of the probability distribution

Headline inflation forecast

14/17

On November 9 and December 21, 2016, the MPC voted unanimously to maintain the policy rate at 1.50 percent(1) Thai economy continues to recover, though with more downside risks. Headline inflation

is expected to slowly rise to the target band. Monetary conditions remain accommodative and conducive to economic recovery.

(2) Looking forward, fragile global economic recovery and uncertainties regarding the direction of economic and monetary policies of major economies might have significant impact on trading partners’ economic prospect and Thai exports.

(3) Financial stability remains sound despite some pockets of risks, such as the deterioration in loan quality of some business sectors and the search for yield behavior.

Monetary policy remains conducive to the economic recovery

The MPC viewed that monetary policy should remain accommodative, and stands ready to utilize available policy tools to ensure that monetary conditions are conducive to the

economic recovery, while ensuring financial stability.

15/17

Key issues monitored by the MPC

Risks to global economic recovery

• US trade policy and its implication to global trade and Thai economy

• Development of European politics

• Financial concerns in China and Europe

• Effects of measures to curb illegal tour operators

Financial stability risks

• Deterioration in loan quality of some business sectors

• Search for yield behavior in the prolonged low interest rate environment, especially investments in riskier assets

Thai baht’s movement

Thai baht depreciated against the US dollar, but to a lesser extent compared with trading partners’ currencies. This might not be beneficial to Thailand’s economic recovery.

16/17

Forecast summary as of December 2016

2015* 2016 2017GDP growth 2.8 3.2 3.2

(3.2) (3.2)Headline inflation -0.9 0.2 1.5

(0.3) (2.0)Core inflation 1.1 0.7 0.8

(0.8) (1.0)* Outturn( ) Monetary Policy Report, September 2016

17/17

Website

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/MPR/Pages/default.aspx

18/17

Forecasts in the Monetary Policy Report, December 2016

% YoY 2015* 2016 2017

GDP Growth 2.8 3.2 3.2

- Private Consumption 2.1 3.1 2.6

- Private Investment -2.0 -0.6 1.6

- Government Consumption 2.2 1.1 3.2

- Public Investment 29.8 9.3 11.9

- Exports of Goods and Services 0.2 1.9 0.6

- Imports of Goods and Services -0.4 -2.3 2.4

Current Account Balance (Billion USD) 32.1 42.2 26.9

- Value of Merchandise Exports -5.6 -0.6 0.0

- Value of Merchandise Imports -10.6 -5.0 7.8* Outturn

Attachment

19/17

Forecast assumptions

2015*2016 2017

Sep 16 Dec 16 Sep 16 Dec 16

Dubai oil price (USD per barrel) 50.8 41.0 41.4 50.0 53.5

Non-fuel commodity prices (% YoY) -23.1 -8.7 -5.9 2.8 3.2

Fresh food prices (% YoY) -10.4 5.7 8.6 2.3 3.0

Public expenditure (calendar year)

Government Consumption (billion baht)** 2,334 2,474 2,405 2,637 2,547

Public investment (billion baht)** 864 946 938 1,054 1,089

Fed funds rate (% year end) 0.38 0.63 0.63 1.13 1.38

Trading partners’ GDP growth (% YoY) 3.3 2.9 3.0 3.1 3.1

Regional currencies per USD (excl. RMB)*** 150.7 153.3 154.5 156.3 160.3

Note: * Outturn** Includes spending on the Water Management and Infrastructure Investment plans

*** Higher value indicates currency depreciation against the USD

Attachment

20/17

Assumption on trading partners’ GDP growths

% YoY Weight (%) 2015*2016 2017

Sep 16 Dec 16 Sep 16 Dec 16

United States 14.9 2.6 1.5 1.6 2.2 2.2

United Kingdom 2.5 2.3 1.6 2.0 0.6 0.8

Euro 10.0 1.6 1.6 1.6 1.2 1.1

Japan 13.6 0.6 0.5 1.0 0.9 1.1

China 15.7 6.9 6.5 6.6 6.3 6.3

Asia** 37.4 3.5 3.2 3.3 3.5 3.5

Total*** 100 3.3 2.9 3.0 3.1 3.1

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