1. ECONOMIC
UPDATE Capital Markets Research
2 February 2011
Thai Economic Update
December Economic Data Nalin Chutchotitham
nalin.c@kasikornbank.com
• Economic indicators showed some signs of
moderation from November
• Farm income continued to expand, providing
support for future consumption
• Manufacturing sector’s growth decelerated
• Private investment index saw a slight decline in
the fourth quarter while private consumption
index was flat for the month
• Business sentiment index showed operators
remained very concerned about rising costs
• Private deposit and credit continued to see
double-digit expansion, in line with the growth
of domestic demand
• Exports and imports growth continued to see a
slowing down trend while current accounts
remained in a surplus
January Inflation Data
• Headline consumer price inflation stayed at
3.0% for the second month but core inflation
edged down to 1.3% from 1.4%
• Food and energy prices were the main drivers
of higher prices recently and MPC’s latest
statement reflected likelihood of further hikes
in the first half of the year
• Producer price inflation was unchanged at
6.0%
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was obtained
from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 1 of 7

2. Economic Update
Monthly Economic Data
Economic indicators showed some signs of Farm income continued to expand, providing
moderation from the previous month support for future consumption
% yoy
As a whole, economic indicators in December continued 40
to show positive trends, with the level of private spending 30
higher than the pre-crisis period and potential for 20
continued growth is reflected through several indicators,
10
namely, low unemployment rate, relatively low borrowing
costs, continued growth in farm income, manufacturing 0
production and exports. Nevertheless, there are signs of -10
some slowdown, when indicators in December are -20
compared to those of November. In any case, the Thai Jan-07 Jan-08 Jan-09 Jan-10
economy should continue to expand by around 4.0% Crops Production Index % yoy Farm Price Index (crops only) % yoy
(Mid of forecast range by Kasikorn Research Center) this
year after an estimate growth of 7.5% - 8.0% in the year Farm income index (a combination of production and
2010. prices) decelerated for the fifth straight month but growth
rate remained high at 19.5% yoy in December. A
This month, we have raised our forecast for the year-end significant change is the return to positive expansion of
policy rate from 2.75% to 3.25%, given the more hawkish production in December (0.8% yoy) after 5 months of
statement from the Bank of Thailand (BoT) and the negative growth. This had been mainly led by the
continued rise of global commodity prices. At the same improvement in weather conditions, especially after the
time, real policy rate remained negative and the BoT is dry and wet seasons had past. Agricultural prices
likely to correct that via gradual increase in its policy remained high and in line with the global prices.
rates. At the same time, we are also revising our outlook % yoy
for the USD/THB. Forecasts for the end of the second 40 400
and fourth quarter this year had been changed to 29.50 30 350
and 29.00, respectively (former 28.3 and 28.00). This is
20 300
mainly on the back of the reallocation of capital flows by
foreign investors to the U.S. and Europe after economic 10 250
data during the past three months had firmed, boosting 0 200
an increased confidence that recovery would be -10 150
sustainable. Meanwhile, investors are also becoming -20 100
more worried about inflationary pressure in Asian Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
economies, including Thailand.
Farm Price Index % yoy Farm Price Index (1995=100, right axis)
%
Sovereign 10-year bond yields
14.0 Comparing the third and the fourth quarter of the year
12.0
2010, the growth rate of farm income index declined from
30.1% yoy to 19.4% yoy, primarily ascribed to the
10.0
deceleration of price climb. Going forward, we continue to
8.0 see agricultural prices at elevated levels as global supply
6.0 of several key farm produce e.g. cotton, rubber, rice,
4.0 wheat, and so forth continued to encounter various types
2.0
of disruptions, especially unexpected severe weather
Jan-08 Jan-09 Jan-10 Jan-11 conditions.
Germany Spain Ireland Greece
While the continuous rise in farm earnings is favorable,
the rising domestic inflation may discount the benefits of
Continued economic growth in major economies would increased income for the low-income households as well.
continue to support the Thai economy. However, there is
a need to remain cautious about slowing down trend in
the Asian economies after a surge of economic activities Some deceleration in manufacturing sector’s
last year and the ongoing monetary policy tightening. At growth
the same time, the little-changed sovereign default risk in % yoy %
Europe due to high levels of government debt is 40 75
worrisome and there has yet been convincing political 30
70
accord for the debt issues among euro zone members 20
that is sufficient to ease market’s concern. U.S. 10 65
employment remained a key worry while inflationary
0 60
pressure in certain large economies such as India and
-10
China also calls for extra precaution. 55
-20
The NESDB is due to announce Thailand’s GDP figures -30 50
st Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
for the fourth quarter of last year on February 21 .
Manufacturing production index ISIC % yoy Capacity Utilization % (right axis)
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was obtained
from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 2 of 7

3. Economic Update
Manufacturing production index (ISIC basis) fell 0.1% 50 = neutral Thai Business Sentiment Indices
mom and 2.5% yoy in December, before seasonal 60
adjustments. However, after accounting for seasonal 55
factors, the index actually climbed by 0.9% mom in
50
December, a continuation from November’s pick up of
45
0.6% mom. A significant pull-back was observed in the
export-intensive sector as hard disk drive production 40
cooled (-18.5% yoy), following massive production and 35
orders during most of the year 2010. Nevertheless, 30
strong production growth of vehicles (16.5% yoy) and Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
electrical appliances (39.6% yoy) suggests that both local BSI BSI 3m forward expectations
and overseas demand remained relatively positive.
In the year 2010, the MPI rose by 14.5% compared to In December, the BSI fell to 51.60 from 52.50 in
the year 2009, indicating a recovery from the recession. November. This drag on the index had been higher
Meanwhile, capacity utilization rate averaged at 63.4% in production costs, a slowdown in production levels and a
2010, much higher than 56.1% back in 2009. slight decline in investment activities.
Private investment index saw a slight decline 60
55
in the fourth quarter 50
45
% YoY 40
Private Investment I ndex
35
200 25
30
190 20 25
15 20
180
10 15
170 5 10
160 0 1Q07 1Q08 1Q09 1Q10
-5
150 Profit Order book Investment
-10
140 Employment Production cost Production
-15
130 -20
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
PII % YoY (RHS) PII level
Private consumption index growth was flat for
Private investment index (PII) fell by 1.6% from the month
November’s level, as a result of the declines in all of its
% mom
components in December. Nevertheless, the PII 5 140
maintained its positive growth over the same periods 4
during the year 2009, growing by 11.0% in December. 3 136
2
For the fourth quarter, the PII shrank by 2.4% qoq 1 132
0
(seasonally adjusted) after a 2.8% climb in the third. This -1 128
deceleration is in line with the slower pace of production -2
-3 124
growth in the manufacturing sector and the substantial -4
pick up in new equipment and machinery purchases -5 120
done during the first three quarters of the year. In any Jan-07 Jan-08 Jan-09 Jan-10
case, the year 2010 saw an expansion of 17.6% in the PCI sa MoM (left axis) Private consumption index sa (right axis)
PII, compared to the slump of 11.2% in the year 2009.
There had been a substantial swing in the private
PII sa % mom Domestic Cement Sales consumption index (PCI) in recent months – a sharp pick
% M oM sa
10 Real Capital Goods Imports Domestic Commercial Car Sales
up was observed in June followed by another 4 months
8
of negative changes before November’s surge of another
6
4
3.5% mom. As for December, the index was flat-lined
2 from November.
0
-2
The overall picture remained rather positive although the
-4
pace of growth is trending down, as could be observed
-6 from each of the PCI components, namely, vehicle sales,
-8 oil consumption, imports of consumer goods and VAT.
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
sa % YoY PCI components
90
The positive signs could also be read from the business Car Index
Oil Index
sentiment index (BSI). Throughout the year 2010, the 70
Real import of consumer goods
index had more or less been stabilizing just above the 50
real VAT
50-point level (except during periods of unrests in April
30
and May), which is a dividing line between positive and
negative outlook. However, the index on 3-month forward 10
outlook averaged above 55.0 for the year, reflecting a -10
more positive business environment.
-30
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was
obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 3 of 7

4. Economic Update
For the whole year, the PCI rose by 5.9%, indicating a sectors. Comparing the average unemployment rate
relatively solid rebound from the contraction of 2.5% in during January – November period of the years 2009
the year 2009. Meanwhile, the consumer confidence and 2010, there is a substantial fall from 1.55% to 1.08%,
index (CCI) picked up again in December to 80.8 from in line with the recovery of the Thai economy.
79.0 in the previous month. The retail sales figure,
although lagging other indicators by a month, continued
its positive trend by registering a positive growth for the '000 persons
Employment growth
% yoy
14th month in a row. 40,000 6.00
39,000 5.00
38,000 4.00
40 120
3.00
37,000
30 110 2.00
36,000
1.00
20 100 35,000 0.00
10 90 34,000 -1.00
33,000 -2.00
0 80
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
-10 70
Employed person (3-m moving average) YoY growth
-20 60
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Retail sales % yoy (LHS) Consumer confidence index (RHS) Exports growth still strong but imports also
accelerated, narrowing the trade surplus
The continued expansion in private sector’s demand % yoy $ mn
could also be reflected through growth rates of private 100 5,000
loans and deposits. In December, credit rose by 12.5% 80 4,000
yoy, an eighth straight month of acceleration while 60 3,000
deposit growth remained elevated at 8.7% yoy, higher 40 2,000
than the previous two months’ average of 8.3%. 20 1,000
0 0
However, the quicker pace of loan growth as compared
-20 -1,000
to deposit does not reduce liquidity in the commercial
-40 -2,000
bank system much. Interbank borrowing costs remained -60 -3,000
capped in a narrow range (2.05 - 2.27%), close to that of Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
the policy rate. At the same time, mutual funds continued Trade balance ( $ mn, right axis) Imports (left axis) Exports (left axis)
to have high demand for short-term securities as
alternatives to holding a large amount of cash. Exports continued strong growth of 18.6% yoy in
December, although somewhat lower than the fourth
% yoy quarter’s overall growth of 21.1%. Exports of agriculture
14 12.5% products rose mainly as a result of higher rubber prices
12 and an increase in rice exports. Meanwhile, exports of
10
major manufactured goods such as plastic products and
8
8.7% electrical appliances remained rather positive. Excluding
6
4
gold, exports registered a growth rate of 15.7% for the
2 month.
0
-2 Imports also decelerated in December (8.8% yoy
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 compared to 35.0% in November), primarily due to the
Private credit Private Deposits smaller gains in imports of capital goods and vehicle
parts. In any case, all categories of imports continued to
expand in December, especially for consumer products
and the raw materials and intermediate goods.
Unemployment rate remained low, supporting
consumption going forward '000 12-month mov ing av erages %
1,400 65
% 1,300
60
3.0 1,200
1,100 55
2.5 1,000
2.0 900 50
800
1.5 45
700
1.0 600 40
00 01 02 03 04 05 06 07 08 09 10
0.5
0.0 Tourist arrival ('000 left axis) Hotel occupany rate (right axis)
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
unemployed labor force Seasonally inactive labor force
The number of tourist arrivals in Thailand rose to a record
Unemployment rate remained low at 1.0% in November high in December at 1.84 million persons. This was a
while the number of employed labor in the labor force pick up of 9.2% from the same period in the previous
continued to grow in December (1.7% yoy) after a brief year, registering a slight slowdown from the fourth
fall in November (-0.4% yoy) due to poor weather quarter’s pace 10.4% yoy. Meanwhile, hotel occupancy
conditions and slowdown in many of the non-agricultural rate increased by a large extent – from 55.4% in
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was
obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 4 of 7

5. Economic Update
November to 58.2%. The maintenance of up-trend in this Inflation rates remained at 3.0% but up-side
sector had also been reflected through the continued risks remained – BoT likely to raise policy rate
surplus in the income, services, and transfers account for
the third straight month. further this year
As a consequence, the current accounts rose from 10%
$1.0bn in November to $1.75bn in December. 8%
Meanwhile, the balance of payments also registered a 6%
higher surplus for the month at $2.3bn, ascribed to the 4%
current accounts and strong capital inflows into the BoT’s 2%
debt securities in the capital accounts. 0%
-2%
-4%
US$, mn Current account (Trade balance + S ervices) and BOP
-6%
6000 05 06 07 08 09 10 11
5000 Headline CPI (left axis) Core CPI (left axis)
4000
3000
Headline inflation rate stayed at 3.0% in January but the
2000
1000
consumer price index showed an acceleration of month-
0 on-month increase (0.5% from 0.2% in the previous
-1000 month). This was mainly attributed to the higher fuel and
-2000 food prices. Nevertheless, core inflation rate edged down
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 slightly from 1.4% to 1.3% for the month.
Trade balance Services and transfers Balance of Payments % MoM
1.5
For the year 2010, exports and imports growth rates 1.0
were rather strong compared to the negative growth in 0.5
2009. However, the trade balance registered a smaller
0.0
surplus of $14bn as imports started to recover in line with
the increase in domestic consumption and investment. -0.5
The income, services and transfers account registered a
-1.0
smaller surplus due to larger outflows of foreign Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11
investment repatriation and the poor performance of the
MoM CPI MoM Core CPI
tourism sector during the first half of the year.
INR
Our concern for price levels going forward in unchanged.
1.3%
Change against USD, past 12-month from Feb 2nd, 2011 The two figures below, we show that there is a close
CNY 3.7%
IDR 3.8%
linkage between global food price index and local
KRW 5.3%
consumer price index as well as between global
PHP 5.5% commodity price index and local producer price index.
THB 7.4% These are indications that cost-push inflation is likely to
SGD 10.6% be a more serious issue going forward.
TWD 10.8%
JPY 11.0%
240 115
MYR 12.4%
220 110
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 200 105
180
Thai baht had appreciated 11% versus the U.S. dollar, 100
160
according the spot exchange rate at year-end 2009 to the 95
140
year-end 2010. This had not hindered exports growth 120 90
much during the course of last year, as global demand 100 85
had started to recover. However, the appreciation of the 80 80
baht did attracted substantial capital inflows into the both 00 01 02 03 04 05 06 07 08 09 10 11
the local bond market and the stock market. As a result,
UN FAO food index, left axis TH CPI index, right axis
the capital accounts registered a surplus of $15.2bn for
the year, a reversion from the year 2009 deficit of $2.8bn.
The overall balance of payments recorded an increase in
60 25
surplus of $31.3bn, a $7bn increase from the year 2009. 20
$ mn Components of the Balance of Payments (12 month running average) 40
15
3,000 20 10
2,500 5
0
2,000 0
-20 -5
1,500
-10
1,000 -40
-15
500 -60 -20
0 00 01 02 03 04 05 06 07 08 09 10 11
-500
CRB index, % YoY, left TH PPI, % YoY, right
Jan-09 Jul-09 Jan-10 Jul-10
Services and transfers Trade balance Errors Capital&Financial
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was
obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 5 of 7

6. Economic Update
Compared to the previous year, the producer price index
was unchanged at 6.0% in January but the index had
risen by 1.4% from December, indicating increased price
pressure.
%
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
03 04 05 06 07 08 09 10 11
avg MLR Fixed 1Y deposit Repo
On January 12th, the BoT raised its policy rate by another
25 bp, marking the fourth hike since it began moving
normalizing interest rates in July 2010. The policy rate
now stands at 2.25% and is likely to increase further to
2.75% by the first half of the year. We revised our
forecast for the policy rate for the year end from 2.75% to
3.25%, reflecting continued price increase in the global
markets and the BoT’s hawkish policy statement.
We note also that the real policy rate (after taken into
account headline inflation rate) remained negative. The
real 12-month deposit rate remained negative as well
while real borrowing costs, using the MLR as a measure,
continued to stay rather low and supportive of continued
economic growth. At the same time, we are concerned
that the government’s price caps on necessities may lead
to pent up price pressure, waiting to be released in the
future.
bp Government bond yield change %
25 4.5
20 4.0
3.5
15
3.0
10
2.5
5 2.0
0 1.5
0.3 0.5 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 12.0 14.0 15.0 16.0 20.0 yrs
Spread (left axis) 1-Feb-11 1-Jan-11
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was
obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 6 of 7

7. Economic Update
Bank of Thailand Economic Data
2010
Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
The Real Sector (%yoy , unless specified otherwise)
Manufacturing Production Index, seasonally adjusted (level) 191.9 188.7 182.4 189.4 188.0 189.1 190.8
Manufacturing Production Index, without seasonal adjustment (level) 194.2 190.1 183.7 201.5 191.2 190.4 190.2
Manufacturing Production Index, without seasonal adjustment 14.2 13.1 8.4 8.1 6.0 5.7 -2.5
Industrial Capacity Utilization (%) 65.4 64.8 63.6 64.4 63.9 63.6 63.4
Private Consumption Indicators
Retail Sales (at 2002 prices) 8.1 12.5 8.2 9.1 5.1 7.6 n.a.
Passenger Car Sales (units) 86.2 74.3 59.4 45.8 43.2 40.9 28.5
Motorcycle Sales (units) 43.2 34.2 20.0 9.3 2.0 9.3 18.2
Imports of Consumer Goods (at 2000 prices) 37.4 13.5 27.4 9.2 11.3 16.9 12.7
Private Investment Indicators
Commercial Car Sales (units) 44.6 37.0 46.4 35.6 28.9 36.3 29.8
Imports of Capital Goods (at 2000 prices) 42.9 27.9 32.0 21.7 11.6 20.5 13.8
Cement Sales (tons) 6.4 3.5 -4.5 3.7 -7.4 -1.8 -0.3
Government Cash Balance (billions of baht) 122.6 -56.3 -0.1 67.4 -76.0 -104.0 -14.0
Consumer Price Index 3.3 3.4 3.3 3.0 2.8 2.8 3.0
Food 6.1 6.9 7.5 6.6 5.5 5.8 5.6
Non-Food 1.5 1.4 1.0 0.9 3.7 1.1 1.6
Core Inflation (excluding raw food and energy) 1.1 1.2 1.2 1.1 1.1 1.1 1.4
External Accounts (Millions of US$, unless specified otherwise)
Exports 15,475.0 16,292.0 17,955.0 17,046.0 17,584.0 17,220.0 15,475.0
( %) 21.2 23.6 21.8 16.6 28.7 18.6 21.2
Imports 16,266.0 15,440.0 14,712.0 14,773.0 17,094.0 15,911.0 16,266.0
( %) 36.5 41.8 15.7 14.4 35.0 8.8 36.5
Trade Balance -791.0 852.0 3,243.0 2,273.0 490.0 1,309.0 -791.0
Current Account Balance 821.0 -1,001.0 280.0 2,767.0 2,740.0 1,019.0 1,750.0
Net Capital Flow 741 2,980 3,206 1,126 2,405 -182 801
Monetary authorities 173 261 149 409 200 -34 976
Government 96 423 901 584 443 -152 73
Bank 2,554 524 1,859 486 3,976 709 -922
Others -2,082 1,772 297 -354 -2,215 -705 674
Balance of Payments 2,166 1,412 3,589 4,270 5,822 820 2,263
Official Reserves (billions of US$) 146.8 151.5 155.2 163.2 171.1 168.0 172.1
Monetary Statistics (End of period) (Billions of baht)
Monetary Base 1,072.0 1,066.9 1,045.6 1,118.1 1,072.2 1,109.9 1,243.3
( %) (9.3) (11.3) (8.0) (13.7) (9.6) (9.3) (12.7)
Narrow Money (M1) 1,180.2 1,173.0 1,181.4 1,175.5 1,202.3 1,235.4 1,302.4
( %) 15.1 15.8 11.4 11.7 11.4 10.8 10.9
Broad Money (M2) 10,846.4 10,887.1 10,968.1 11,116.1 11,323.3 11,501.6 11,775.4
( %) 6.9 8.7 8.4 9.8 11.1 11.1 11.0
Other Depository Corporations Deposits 9,983.3 9,974.5 10,015.9 10,091.6 10,204.1 10,389.3 10,583.4
( %) 6.2 7.6 6.6 7.8 8.5 8.1 8.7
Other Depository Corporations Private Credits 9,196.7 9,219.7 9,299.8 9,432.7 9,580.5 9,743.9 9,934.3
( %) 8.5 9.1 9.8 10.8 12.1 12.2 12.5
Interest Rates (% p.a.)
Repurchase Rate, 1 day (closing rate daily average) 1.25 1.40 1.56 1.75 1.75 1.75 2.00
Overnight Interbank Rate (mode daily average) 1.13 1.27 1.43 1.62 1.62 1.62 1.88
Fixed Deposit Rate (1 year) 0.65-0.75 1.00-1.25 1.00-1.25 1.10-1.43 1.10-1.50 1.10-1.50 1.50-1.63
Prime Rate (MLR) 5.85-6.25 6.00-6.38 6.00-6.38 6.00-6.38 6.00-6.38 6.00-6.38 6.12-6.50
Exchange Rate (Baht : US$) 32.47 32.33 31.74 30.83 29.97 29.89 30.12
Source: Bank of Thailand
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was
obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein.
Further information on the securities referred to herein may be obtained upon request.
Page 7 of 7