Economic Intelligence Center (EIC)

June 2012

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Unit
Economic Growth (GDP)
Headline Inflation
Core Inflation
Policy Rate (RP-1D) (end period)
THB/USD (period average)

%YOY
%YOY
%YOY
%p.a.
THB/USD

Actual
2011
1Q12*
0.1
0.3
3.8
3.4
2.4
2.7
3.25
3.0
31.2
30.7

SCB EIC forecasts

2011 1Q12* 2011
3.6
3.0
16.5
2.6
3.5
4.4
2.0
2.3
2.7
3.0
3.0
3.0
31.5
30.5
30.0

1Q12*
5.6-5.8
3.5-4.0
2.5-3.0
3.0
30.0

Sources: SCB EIC; NESDB; Bank of Thailand; Consensus Economics; foreign research houses.
*1Q12 are actual figures

Economic Growth (GDP)

Inflation

The Thai economy is expected to grow by 5.6-5.8% in 2012

Headline Inflation for 2012 is expected to remain around

but with increased risks from external factors.

3.5-4.0% despite the decreased expected price of crude

The domestic economy is forecasted to grow well in the

second half of the year thanks to private spending, which can be
clearly seen from the increasing demand for credit. Outstanding
credit in the first quarter has grown 14% compared to the same
quarter in the previous year. Government spending in the second
half of the year is also expected to grow significantly due to the
disbursement of investment budget from the Royal Decree for
flood management. Thus, public spending is another factor that
will increase domestic demand.
The Eurozone crisis has affected Thai exports. Aside from the
weakening European economy, large banks in countries like
Spain and Italy have also had to decrease lending to the private
sector as they are facing increasing non-performing loans. This
will inevitably affect demand for goods imported from Thailand.

oil.

Policy Interest Rate

Thai Baht

The policy rate will remain at 3.0% for 2012.

The Thai Baht will fluctuate between 30-32 Baht per US

Inflation for the remainder of the year is still within the Bank of
Thailands target. Core inflation is expected to increase to 2.7% in
the fourth quarter, which is not over the inflation target. Furthermore,
much of the increased in prices is in response to costs which cannot
be controlled by monetary policy. Therefore, there is no need to
adjust the policy rate.
Keep an eye on domestic demand. If domestic spending grows well
in the last two quarters of the year, it is likely that the Bank of
Thailand will raise the policy rate at the beginning of 2013.

Dollar.

Phacharaphot Nuntramas, Ph.D. phacharaphot.nuntramas@scb.co.th

The decrease in crude oil prices will slow down the pace of
general price increases only slightly as operators still need to
adjust prices according to costs that have already increased
such as labor and raw materials. Furthermore, there are other
products that are still waiting to have their prices increased
such as electricity, gas, LPG for transportation, as well as items
that the government has asked operators to delay the price
increase for four months (June to September). Therefore,
inflation should not decrease by much from the previous
forecast and should remain around 3.5-4.0%.

Volatility will remain at elevated level during the next 1-2

months as a result of many risk factors such as the results of
the Greek election in mid-June which may decide whether
Greece shall remain a member of the Eurozone, as well as how
the European Central Bank plans to solve the banking crisis
which has led many investors to shy away from holding risky
assets.
Thus, once the situation in Europe becomes clearer towards
the end of the year, the Thai Baht should strengthen along
with other currencies in the region.