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Key developments and outlook

2017* 2018 2019

GDP growth 3.9 4.1 4.1

(3.9) -

Headline inflation 0.7 1.0 1.2

(1.1) -

Core inflation 0.6 0.7 0.8

(0.8) -

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• The Thai economy is projected to continue expanding and achieve higher growth than previous assessment particularly on the back of continued improvements in merchandise exports and tourism.

• Headline inflation is projected to increase at a slightly slower pace than previous assessment owing to lower-than-expected fresh food prices.

• Risks to growth forecast tilt to the downside due to uncertainties pertaining to U.S. foreign trade policies and potential retaliatory measures from U.S. trading partners which might negatively affect global trade, Thailand’s trading partner growth, and Thai exports.

• Risks to inflation forecast tilt to the downside consistent with risks to economic growth.

* Outturn, ( ) Monetary Policy Report, December 2017

• G3 economies continue to expand and become more broad-based driven mainly by consumption and exports.

• China gains further traction despite some slowdown that remains in line with its economic growth target and government economic reforms.

• Asian economies continue expanding given high export growth across various product categories consistent with improvement in global trade volume.

• Risks to the global economy tilt to the downside due to uncertainties pertaining to U.S. foreign trade policies and potential retaliatory measures from its trading partners which might negatively affect global trade.

• Most central banks maintain accommodative monetary policy stance but some gradually reduce the degree of monetary policy accommodation following improvements in economic and inflation outlooks such as Bank Negara Malaysia (BNM).

• The Fed raised the federal funds rate once again as expected at its latest meeting in March 2018.

Monetary policy of trading partner economies

Asian exports achieve high growth across various product categories

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Note: *Asia exporters include Hong Kong, Taiwan, South Korea, Malaysia, and Singapore ( ) a share of total exports in 2017Commodity-related products include crude oil, metals, chemicals, rubber, and veg. oil.Other manufacturing products include textiles, papers, furniture, footwear and miscellaneous

Source: CEIC

5060708090

100110120130140

2013 2014 2015 2016 2017 2018

Electronics (41.0%) Other Manu (22.9%)Commodity-related (21.0%) Machinery (5.7%)Transportation (8.2%) Food (1.2%)

Jan 18

Index, sa (Jan 2013 = 100)

Trading partner economies record stronger growth

• Dubai oil prices are revised up throughout the forecast horizon given higher demand following global economic growth and supported by successful extension of OPEC and Non-OPEC’s agreement on production cuts.

• Risks to oil price projection tilt upward Upside risks include (1) higher-than-

expected demand for oil given positive global economic outlook and(2) geopolitical risks in the Middle East and the Korean Peninsula.

Downside risks include higher-than-expected oil output from both U.S. shale oil producers and OPEC and Non-OPEC producers.

Dubai oil price assumption

2030405060708090

2015 2016 2017 2018 2562

Dec-17

Mar-18

+1 S.D.

–0.75 S.D.

USD/Barrel

USD/Barrel 2017* 2018 2019

As of Mar 1853.1

62.4 63.0

As of Dec 17 55.0 -

* Outturn

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Global oil prices are expected to trend up

• The value of merchandise exports in 2018 is revised up from the previous assessment both in terms of volume and price in tandem with improvements in the global economy, global trade volume, and oil prices.

• The value of merchandise exports in 2019 is expected to continue expanding albeit at a slower pace following a projected slowdown in trading partner growth and globaltrade volume expansion.

• U.S. trade protection measures with announced tariffs on products such as steel, aluminum, and washing machines are expected to have limited impact given that only a small share of Thai exports would be subject to the new tariffs. However, further developments regarding trade measures to be introduced by the U.S. and China warrant close monitoring.

Merchandise export value projection (USD)

% YoY 2017* 2018 2019

As of Mar 189.7

7.0 3.6

As of Dec 17 4.0 -

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Thailand’s merchandise export value (by product)

020406080

100120140160

2013 2014 2015 2016 2017 2018

Agricultural products (12.3%)Electrical appliances (5.6%)Automative parts (6.5%)Petroluem-related products (11.5%)Electronics excl. HDD (9.0%)

Feb 18Index, 3mm sa (Jan 13 = 100)

Merchandise exports continue to expandacross various product categories and almost all export destinations

Note: ( ) indicates share of total exports in 2016Source: Thai Customs Department, calculated by BOT

* Outturn

Projected number of foreign tourists to Thailand

Million 2017* 2018 2019

As of Mar 1835.4

37.6 39.0

As of Dec 17 37.3 -

6 / 221/ Free and Independent Traveler

Number of foreign tourists by nationality

0

100

200

300

2014 2015 2016 2017 2018

Index, 3mm sa (Jan 14 = 100)

Europe ex Russia (15%)

China (28%)

Malaysia (10%)

Russia (4%)

Total

• The number of foreign tourists continues expanding in tandem with global economic expansion—particularly Chinese tourists, both group tourists and high purchasing power FIT1/. Furthermore, Indian tourists are expected to increase after the Airport Authority of India granted airlines registered in Thailand additional capacity entitlements under bilateral air services agreements.

• Going forward, the number of foreign tourists is projected to slow down given capacity constraints in accommodating the rising number of tourists in the main airports, but such constraints are expected to ease somewhat given the increasing roles of local airports (such as the Krabi, Suratthani, and U-tapao Airports) in facilitating international flights.

Exports of services continue to expand driven by tourism

Feb 18

Note: ( ) indicates share of tourists in 2016Source: Department of Tourism

* Outturn

707580859095

100105110

2014 2015 2016 2017 2018

Farm income Average non-farm income

Private consumption is expected to be supported by several factors:

1) Income among non-agricultural households with medium-to-high earnings that remains sound

2) Earnings of low-income households with signs of some improvement as employment picks up in both export-related businesses and tourism

3) Household income in some agricultural sectors which is expected to expand due to (1) increases in agricultural output despite contraction in prices and (2) government measures such as the social welfare card project (second phase), the community enterprise development project, and the agricultural reform project

However, private consumption in the period ahead could be held down by following factors:

1) Structural changes in the labor market such as adoption of automation in place of human labor in the production process and migration of workers out of the manufacturing sector to the services sector with relatively lower wages

2) Elevated household debt

Index, 3mm sa (Jan 14 = 100)

Farm income and nonfarm income

Feb 18

7 / 22

Private consumption is projected to gradually expand

Sources: Office of Agricultural Economics, National Statistical Office, and Ministry of Commerce; calculated by BOT

• Private investment gains further traction as reflected by rising demand for business loans and significant increase in total value of investment applications submitted to the Board of Investment at the end of the previous year.

• Moreover, government investment incentives would play an important role in driving private investment, particularly through public-private partnership (PPP) and the Eastern Economic Corridor (EEC) initiative whose prospects becomes increasingly certain, which would shore up business confidence. Furthermore, government measures aimed at improving the well-being of the low-income households would partly help raise private investment to some extent.

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Private investment indexIndex, 3mm sa (2010 = 100)

120

125

130

135

140

2014 2015 2016 2017 2018

Private investment is expected to continue expanding in accordance with growth in private consumption and merchandise exports

Feb 18

Source: Bank of Thailand

• Public expenditure in 2018 is lower than previously estimated as the impact from the Public Procurement and Supplies Management Act, B.E. 2560 is larger and longer than expected, particularly on disbursement by local governments that have not previously operated under this system and would thus need some time for adjustment.

• Most investment projects by state-owned enterprises (SOEs) continue as planned, except some projects that may be postponed such as the Mass Rapid Transit (MRT) Authority’s Orange Line project (Thailand Cultural Centre – Min Buri) which has some difficulty in accessing construction sites.

Billion Baht 2017* 2018 2019

Government consumption2,532

2,676 2,838

(2,708) -

Public investment926

1,038 1,092

(1,067) -

Public spending projection at current prices (calendar year)

9 / 22

Public expenditure drives growth to the lesser extent than previously assessed

* Outturn, ( ) Monetary Policy Report December 2017

(% YoY) 2017*2018 2019

Dec 17 Mar 18 Mar 18

GDP growth 3.9 3.9 4.1 4.1

- Private consumption 3.2 3.1 3.3 3.3

- Private investment 1.7 2.3 3.0 3.6

- Government consumption 0.5 3.2 2.9 3.3

- Public investment -1.2 9.0 9.5 3.4

- Exports of goods and services 5.5 3.7 5.2 3.6

- Imports of goods and services 6.8 3.5 5.5 3.7

Current account balance (billion USD) 49.3 43.1 42.2 39.5

- Value of merchandise exports 9.7 4.0 7.0 3.6

- Value of merchandise imports 14.4 7.5 11.5 5.4

- Number of tourists (Million) 35.4 37.3 37.6 39.0

10 / 22

The Thai economy would achieve higher growth than previous assessment

Note: * Outturn

Uncertainties pertaining to U.S. foreign trade policies and potential retaliatory measures from its trading partners

Geopolitical risks that may affect trading partner growth

A larger-than-expected impact from the Public Procurement Act on public expenditure

Lower-than-expected growth in domestic spending as improvement in purchasing power is not yet sufficiently broad-based

Better-than-expected trading partner growth due to U.S. tax reform and a softer-than-expected slowdown of the Chinese economy

A faster-than-expected government infrastructure investment and measures to accelerate spending of funds accumulated by local administrative organizations which could help boost public disbursement and stimulate a higher private investment

Downside risks

Upside risks

GDP growth forecast

11 / 22

Risks to growth projection tilt to the downside given risks surrounding U.S. foreign trade policies and the impact from the Public Procurement Act

Note: Fan chart covers 90% of the probability distribution

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10

2014 2015 2016 2017 2018 2019

% YoY

Inflation is projected to gradually trend up

• In recent periods, inflation stabilizes at a lowerlevel than previously estimated owing to continued contraction in fresh food prices.

• Going forward, inflation is expected to rise at a slower pace than previously assessed.

Cost-push pressures would increase at a slower pace due to low fresh food prices and structural changes following technological advancements and higher price competition.

Demand pressures are largely unchanged from the previous assessment, with core inflation expecting to slowly rise in line with economic growth.

% YoY 2017* 2018 2019

Headline inflation0.7

1.0 1.2

(1.1)

Core inflation0.6

0.7 0.8

(0.8)

Inflation projections

12 / 22

Contribution to headline inflation%YoY

Feb 18

-3-2-10123

2014 2015 2016 2017 2018Raw food price (15.69%) Energy price (11.75%)Core inflation (72.56%) Headline inflation

Source: Ministry of Commerce, calculated by Bank of Thailand, ( ) denotes share in headline inflation basket

* Outturn, ( ) Monetary Policy Report December 2017

Headline inflation forecast Core inflation forecast

13 / 22

Risks to inflation projection tilt to the downside consistent with risks to growth projection

Note: Fan chart covers 90% of the probability distribution

-3

-2

-1

0

1

2

3

4

5

-3

-2

-1

0

1

2

3

4

5

2014 2015 2016 2017 2018 2019

Headline inflation target 2.5 1.5%

% YoY

-1

0

1

2

3

-1

0

1

2

3

2014 2015 2016 2017 2018 2019

% YoY

2017* 2018 2019

GDP growth 3.9 4.1 4.1

(3.9)

Headline inflation 0.7 1.0 1.2

(1.1)

Core inflation 0.6 0.7 0.8

(0.8)

14 / 22

Forecast summary as of March 2018

* Outturn, ( ) Monetary Policy Report December 2017

Key considerations and assessments in formulating monetary policy

Sustainable economic

growth

The Thai economy is projected to continue expanding on account of exports and tourism. Nevertheless, private consumption will expand only gradually as benefits from overall economic expansion has yet to fully extend to the labor market due partly to structural problems in the labor market which should be addressed through reform measures.

Price Stability

Headline inflation is expected to rise in line with domestic demand albeit at a slower pace than previously assessed owing to supply-side factors. However, headline inflation is projected to return to target within the first half of 2018. Potential changes in inflation dynamics due to structural changes that lead to lower production costs and intensified price competition warrant monitoring.

FinancialStability

Financial stability remains sound overall but there is increased accumulation of risks in certain pockets, particularly debt serviceability of households and SMEs and search-for-yield behavior in the prolonged low interest rate environment, together with an oversupply in the real estate market.

15 / 22

The MPC voted unanimously and later 6 to 1 to keep the policy interest rate unchanged at 1.50 percent at the meetings on February 14 and March 28, 2018 respectively. Monetary policy accommodation would still be necessary to support a morerobust growth in domestic demand which would foster an increase in headline inflation. One Committee member voted to raise the policy rate to 1.75 percent at the March meeting. The unusually low interest rates for a prolonged period might prompt households and businesses to underestimate risks to potential changes in financial conditions in the future. Furthermore, a gradual, timely reduction in monetary policy accommodation would not hinder economic growth or price stability; it would instead help alleviate risks to financial stability in the future.

New Loan Rate (NLR)*

New Loan Rate (NLR)* stabilizes at a low level.

16 / 22

7.086.28

5.034.00

2.751.50

0

2

4

6

8

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

MLR NLR RP%

2013 20172014 2015 2016

1.01.52.02.53.03.54.04.55.05.56.0

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan

1Mn 2Y

5Y 10Y

%

Overall bond yields decline slightly at the beginning of the year owing to higher demand from domestic and foreign investors, while the decrease in short-term bond yields is partly due to supply-side factors.

Unit: bps YTD

1Mn -42Y -165Y -410Y -1

2013 20172014 2015 2016

Source: Bank of Thailand

2018

2018

Thai government bond yields

* The NLR is calculated from interest payments on loan contracts by 14 Thai commercial banks excluding loans to households and financial intermediaries and is weighted by loan size. This covers loan in Thai baht exceeding 20 million baht in all types of loan, objectives, and term, as well as with and without collateral. In addition, interest rates on loan contracts are calculated from the median between the highest and lowest interest rate of each contract.

Source: ThaiBMA (as of March 27, 2018)

Continued monetary policy accommodation contributes to accommodative financial conditions and low financing costs

Credit growth in the commercial bank system*Growth in business financing outstanding classified by source*

Growth in business financing remains largely unchanged despite some slowdown in financing through the bond market.

Business financing continues to expand through various channels

17 / 22

Private credit continues to expand driven by both corporate and household credits. SME loan growth improves across various sectors, reflecting a more broad-based economic recovery.

0

2

4

6

8

10

Jan 2015

Jul Jan 2016

Jul Jan 2017

Jul Jan 2018

Business loan

Household loan

Private loan

3.8

4.64.3

9.1**

3.85.1

0

10

20

30

40

Jan2013

Jan2014

Jan2015

Jan2016

Jan2017

Jan2018

Outstanding of corporate debt**Business creditTotal financing

Percentage change from the same period last yearPercentage change from the same period last year

Note: * Business credit covers lending activities of Other Depository Corporations (ODCs) including commercial banks, special financial institutions, cooperatives and money market mutual funds

** In August businesses in telecommunication and energy sectors did not roll over the matured bondsSources: ThaiBMA and Bank of Thailand

30

31

32

33

34

35

36

3785

90

95

100

105

110

115

120

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan

Currency changes against U.S. dollar

The baht appreciates against U.S. dollar and appreciates somewhat against other trading partner currencies consistent with Thailand’s economic fundamentals

18 / 22

The Nominal Effective Exchange Rate (NEER) and RealEffective Exchange Rate (REER) appreciate following the baht’s appreciation relative to most trading partner currencies and consistent with Thailand’s economic fundamentals, in particular a strong external stability

The Thai baht appreciates against U.S. dollar in line with movements of most regional currencies owing to a better growth outlook of the euro area and Asia relative to the U.S. as well as uncertainties on U.S. foreign trade policies

2015 2016 2017 2018

USDTHB (RHS)

DXY

NEERAppreciation

-6%

-4%

-2%

0%

2%

4%

6%

8%

PHP

INR

IDR

AUD

KRW

TWD

SGD

EUR

CNY

MYR

THB

GBP

JPY

Positive value indicates appreciation

% (27 Mar 18 compared with 29 Dec 17)

REER

Note: (1) DXY is currency index of USD relative to EUR JPY GBP CAD SEK CHF (2) REER data are available as monthly averages.

Thai baht vis-a-vis U.S. dollar (USDTHB), Nominal Effective Exchange Rate (NEER), and the Dollar Index (DXY)

Baht per U.S. dollarIndex

Source: Bank of Thailand, Bloomberg, and Reuters (data as of March 27, 2018) Source: Bank of Thailand and Reuters (data as of March 27, 2018)

3.1 3.7

0

5

10

15

20

Quarter 12012

Quarter 12013

Quarter 12014

Quarter 12015

Quarter 12016

Quarter 12017

Business

Unclassified

Credit card

Personal loans underregulation

Contribution to growth of household debt by loan purpose

Financial stability remains sound despite increased accumulation of risksin certain pockets such as debt serviceability and search-for-yield behavior

19 / 22

Growth in assets and deposits of savings cooperatives remains high despite some slowdown after regulatory authorities revise supervisory regulations

Household debt , particularly credit card and auto loans, accelerates somewhat, with debt serviceability of some households weakened

Growth of asset, investment, and deposits of savings cooperatives

%YOY

Source: Bank of Thailand

0

10

20

30

40

50

60

70

2012 2013 2014 2015 2016 2017 Jan-18

Liabilities: Deposits from members

Assets

Equity instrument investments (2.0%)

Debt instrument investments (14.6%)

Loan to members (74.8%)

%YOY

Note : ( ) denotes share to total assets of savings cooperatives as of December 2016Source: Cooperative Auditing Department, calculations by Bank of Thailand

Monetary policy should remain accommodative for some time to supportstronger growth while there remain key issues that continue to warrant monitoring

• Uncertainties surrounding U.S. foreign trade policies and potential retaliatory measures from trading partners which could impact global trade and Thai exports especially through supply chains

• Geopolitical risks

• Strength of domestic spending• Outlook of public spending after the

enforcement of the Public Procurement and Supplies Management Act, B.E. 2560

• Potential changes in inflation dynamics due to structural factors

Financial markets• Reduction in the degree of monetary policy

accommodation by advanced economies• Short-term capital flows volatility

20 / 22

Global economy Thai economy

Thai financial stabilities• Search-for-yield behavior and underpricing

of risks in the prolonged low interest rate environment

• Debt serviceability of households and SMEs• Oversupply of property in certain price

ranges and areas

Forecast assumptions

Attachment

21 / 22

% YoY 2017*2018 2019

Dec 17 Mar 18 Mar 18

Dubai oil price (USD per barrel) 53.1 55.0 62.4 63.0

Farm income (% YoY) 1.7 4.1 3.1 2.2

Public expenditure (calendar year)

- Government consumption (billion Baht)** 2,532 2,708 2,676 2,838

- Public investment (billion Baht)** 926 1,067 1,038 1,092

Fed funds rate (% year end) 1.375 2.125 2.125 2.875

Trading partners’ GDP growth (% YoY) 3.9 3.5 3.7 3.6

Regional currencies per USD (excl. RMB)*** 155.7 154.3 148.0 147.0

Note: * Outturn** Includes spending in Infrastructure Investment plans*** Higher value indicates currency depreciation against the USD

Assumption on trading partners’ GDP growth

Attachment

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% YoY Weight 2017*2018 2019

Dec 17 Mar 18 Mar 18

United States 14.9 2.3 2.5 2.7 2.4

Euro 10.0 2.5 1.8 2.3 2.0

Japan 13.6 1.7 1.2 1.5 1.0

China 15.7 6.9 6.5 6.6 6.4

Asia** 37.4 4.6 4.1 4.2 4.3

Total*** 100 3.9 3.5 3.7 3.6

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).