1. ECONOMIC
UPDATE Capital Markets Research
1 March 2011
Thai Economic Update
January Economic Data Nalin Chutchotitham
nalin.c@kasikornbank.com
• Economic indicators in January were stronger
than year-end 2010
• Farm income continued to expand on the back
of production and price increases
• Manufacturing production rose slightly while
capacity utilization was relatively stable
• Private investment was stronger in January on
the back of construction and capital goods
imports
• Private consumption index picked up from flat
growth in December
• Record gold imports turned trade balance into
a deficit while overall balance of payments
remained in surplus
• Unemployment rate remained low but labor
shortage may put pressure on wages
February Inflation Data
• Headline consumer price inflation was slightly
lower, recording at 2.9% vs. January’s 3.0%.
Core inflation over the past three months
firmed at 1.3-1.4%
• Producer price inflation accelerated to 7.4%
from 6.0% a month earlier
• Inflation figures unlikely to change direction of
BoT policy rate hikes while the challenge of
inflation expectation management remain
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 6

2. Economic Update
Monthly Economic Data
Economic indicators in January were stronger Asian currencies changes vs. USD (YTD)
than year-end 2010
THB -1.6% Change against USD, year-to-date
Overall economic development compared to December JPY -1.2%
showed the four engines of the economy continuing to TWD -1.0%
work hand-in-hand. Risk factors going forward include INR -0.6%
increased price pressure and higher interest rates. At the KRW 0.2%
same time, risks from global financial markets’ volatilities CNY 0.6%
and global economic slowdown continue to play an PHP 0.9%
important role in local economic expectations. MYR 0.9%
SGD 1.0%
IDR 2.1%
Global market concerns remain in concern over
inflationary pressure in Emerging Market economies and -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
in some development markets. At the same time, political
turmoil that had been developing in the Middle East and The NESDB reported Thai GDP numbers at end-
North Africa had also added geopolitical risk into the February. The Thai economy had expanded by 3.8% in
equation. It particular, there are ongoing worries over oil the fourth quarter after registering 6.6% yoy growth in the
price and the strength of global economic expansion. third. From a quarter-on-quarter view (after adjustments
for seasonality), the economy had expanded by 1.2% in
KBank Forecasts Q4, ending Thailand’s technical recession (Q2 -0.4% and
MPC meeting Policy rate (%)
Q3 -0.3%).
Mar 9th 2.50
% contribution
Apr 20th 2.75
15.0
Jun 1st 3.00
Q3 3.25 10.0
Year end 2011 3.25
5.0
USD/THB
End Jun 2011 30.00 0.0
End Dec 2011 29.00
-5.0
-10.0
Meanwhile, local stock market had been in range trade Consumption Public consumption
-15.0 Inv estment Change in inv entories
during the past two months. While February saw some Net Ex ports GDP Grow th
rebound in the SET index after investors had taken profit -20.0
on LTF bought five years ago, there are new risks factors 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
i.e. Arab nations’ political unrests and higher energy
prices. Farm income continued to expand on the back
$ mn Foreign net buy (year-to-date)
of production and price increases
3000 1080
2500 1040
Farm income index accelerated in January, growing by
2000 1000 30.6% yoy vs. the previous month’s 23.3%. Both
1500 960 production and price saw substantial increases during the
920
1000 month, partly on the back of rice cultivation that had been
880
500
840 pushed backwards from dry weather in mid-2010 and
0 800
-500
global pressure on agricultural prices. In particular, crop
760
-1000 720 production had reverted to positive growth for the second
-1500 680 straight month, compared to contraction during the past
Jan Apr Jul Oct Jan four quarters. Moreover, the continuous gain in farm
Foreign net buy (YTD$ mn,left axis) Foreign net buy (2011) SET Index (right axis income reflect positive consumption pattern going
forward.
Asian Stock Markets (as of Mar 1st)
From January 2011 onwards, the Bank of Thailand (BoT) would be using the
close YTD agricultural sector’s data from the Office of Agricultural Economics but maintain
calculation of farm income index.
Japan 10,754.0 5.1%
Taiwan 8,727.6 -2.7% Manufacturing production rose slightly while
Malaysia 1,502.2 -1.1% capacity utilization was relatively stable
Australia 4,826.4 1.7% % yoy %
Thailand 994.5 -3.7% 40 75
Philippines 3,784.2 -9.9% 30
70
Hong Kong 23,396.4 1.6% 20
10 65
S Korea 1,939.3 -5.4%
0
China 2,918.9 3.9% 60
-10
Singapore 3,067.6 -3.8% 55
-20
Indonesia 3,512.6 -5.2%
-30 50
India 18,446.5 -10.1% Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
Source: Bloomberg
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 6

3. Economic Update
Manufacturing production index (MPI) rose 0.8% on 50 = neutral Thai Business Sentiment Indices
the month, mainly attributable to production in the 60
electronics, vehicles, and electrical appliances sectors. 55
Compared to the same period last year, the MPI
50
reverted to an increase of 3.7% yoy after a contraction
45
of 3.4% in December due to unusually high production
in December 2009. In January, the export-oriented 40
industries saw production growth returning to 0.0%yoy 35
growth after a brief contraction in December. At the 30
same time, domestic market-oriented industries Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
showed strong growth of 16.8% yoy. BSI BSI 3m forward expectations
Capacity utilization rate saw a slight increase on the Private consumption index picked up from flat
seasonally-adjusted basis (63.5% to 63.9%).
growth in December
Private investment was stronger on the back Private consumption index (PCI) rose 1.0% mom sa
of construction and capital goods imports while it was flat in December. Compared to a year earlier,
the PCI increased 4.7%, a faster pace compared to the
% y oy
%MoM sa fourth quarter’s 3.5% growth. In particular, imports of
20 5.0 consumer goods and vehicle sales rose strongly in
18 4.0 January, led by economic expansion and continuous
16 3.0 growth in farm income and demand of environmental-
14 2.0 friendly vehicles.
12 1.0
10 0.0 % yoy
10 140
8 -1.0
8
6 PII sa % mom PII % yoy -2.0 136
6
4 -3.0 4
132
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 2
0
128
-2
Private investment index (PII) reverted to an increase by -4 124
registering a growth rate of 3.7% mom in January after -6
falling by 1.0% in December. From the year-on-year -8 120
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
growth basis, PII continued to see consistent climb since
the beginning of the year 2010. The 17.8% yoy PCI yoy (LHS) Private consumption index sa (right axis)
expansion in 2010 had more than offset the contraction
of 11.2% yoy in 2009. In January, the PII rose 13.0% yoy, The figure below shows that expectations and
primarily led by capital goods imports and sales of assessment of current conditions by consumers had
commercial vehicles. Indicators in the construction sector been deviating. This is likely to reflect the ongoing
also showed positive trend due to the repair works uncertainties with global economic activities and the
needed after severe flooding last year.. beginning of price pressure. In any case, we are a bit
concern at the gradual pick up in the short-term
% M oM sa
consumer confidence as it continues to remain at very
10 low levels despite the improvement in Thai economic
8 recovery during the past year.
6
4
2 120
0 110
-2
100
-4
Domestic Cement Sales
-6 90
Real Capital Goods Imports
-8 80
-10 Domestic Commercial Car Sales
70
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 60
50
The business sentiment index returned to an increase in 40
January, rising from 51.6 to 52.8. Meanwhile, the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
business sentiment index (expectations) fell slightly from CCI (present conditions) CCI (expectations)
56.6 to 56.1. Going forward, the business sector is likely
to remain concerned about rising costs while demand
may slowdown as compared to the previous year. Private deposit and credit expansion continued to see
positive trends. Private loan growth accelerated for the
9th consecutive months and registered strong growth of
14.4% yoy in January. The key contributor of credit
growth remained the household sector but corporate
sector’s loan growth saw a substantial jump in January,
contributing 4.9% of the 14.4% growth.
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 6

4. Economic Update
Deposit growth continued but had been seeing a more Imports quickened on the back of gold imports which
stable pace at above 8.0% during the past four months. rose to record high in January ($1.79bn) due to the
Broad money was shown to have expanded by 11.5% correction in gold prices while local exporters and
yoy, reflecting commercial banks’ efforts in mobilizing investors maintained a positive view on gold price this
deposits via various saving programs. This is in order to year. The trade balance was in deficit by $588mn but
prepare for the increasing demand for loans going would register a surplus of $1,143mn if imports of gold
forward. had been excluded.
% yoy US$, mn Current account (Trade balance + S ervices) and BOP
16 14.4% 6000
14
5000
12
4000
10
8 8.9% 3000
6 2000
4 1000
2 0
0 -1000
-2 -2000
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11
Private credit Private Deposits Trade balance Services and transfers Balance of Payments
Tourism sector continue to remain in positive trend with
Unemployment rate remained low but labor the number of tourist arrivals expanding by 12.7% yoy or
shortage may put pressure on wages 1.8 million persons. Hotel occupancy rate was also in line
with the arrivals, increasing from 58.5% in December to
'000 persons % yoy 62.6% in January.
Employment growth
40,000 6.00
39,000 5.00 The current account balance registered a surplus of
38,000 4.00 $1.09bn as the surplus in services, income and transfers
3.00 account helped to offset the deficit in the trade accounts.
37,000
2.00
36,000 The overall balance of payments recorded a smaller
1.00
35,000 0.00
surplus at $1.69bn vs. December’s $2.26bn.
34,000 -1.00
33,000 -2.00 2,000 80
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 75
1,800 70
Employed person (3-m moving average) YoY growth 65
1,600
60
1,400 55
Unemployment rate lowered further to 0.7% in December 50
but there remain other types of problems with the labor 1,200 45
market. In particular, the non-agriculture sector is still 1,000 40
35
seeing negative employment growth for the 4th straight 800 30
month (Dec -1.4%yoy), even though the Thai economy Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
continues to see expansionary trends. Much of the Tourist arrival ('000 left axis) Hotel occupany rate (right axis)
“missing” workforce has gone into agricultural sector
(Dec 6.0% yoy), driven by the postponement of crop
cultivation (due to unfavorable weather last year) and
better continuous rise in agricultural prices. While Price level grew at a slower pace but unlikely
Thailand need not worry about unemployment, the labor to change BoT’s course
shortage condition may pose wage pressure going
forward. Headline inflation rate edged down from 3.03% in
January to 2.87% in February. Government’s prolonging
% YoY
of water, electricity, and railway fare subsidies helped to
12
slow down price increases in local markets.
8
4 % Contributors of consumer price inflation
0 10
(4) 8
(8) 6
(12)
4
1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10
2
0
All Agriculture Manufacturing -2
Trading Hotels and restaurants -4
-6
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
Record gold imports turned trade balance into Core consumer price Raw food Energy Headline inflation
a deficit while overall balance of payments
Core inflation rate has firmed up slightly to 1.45% from
remained in surplus 1.3% in January. From May to November last year, core
External sector – exports continued to expand inflation rate was kept low at 1.1-1.2%. During the past
positively (21.4% yoy vs Dec 18.6%) while imports three months, core inflation rate had been 1.3-1.4% and
picked up significantly (31.2% yoy vs. Q4 18.8%). is expected to climb further this year.
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 6

5. Economic Update
The producer price index accelerated to 7.4% yoy, up Government bond yields had also risen since the BoT
from 6.0% in the previous month. Based on monthly had raised policy rate by another 25bp in January and
changes, the index showed an increased price pressure, policy meeting’s minutes showed that the central
rising by 1.4% mom and 2.5% mom in January and continue to see substantial price pressure for the rest of
February, respectively. the year. For the first half of the year, we may be seeing
a bear-flatting yield curve as the short-end rises in line
The figure below shows that much of price pressure with the policy rate by another 75bp. Nevertheless, the
continues to be attributed to food and beverages (5.15% longer-end of the curve could experience a steepening
in Feb) while transportation and communication costs bias due to both global and local price pressure and
had also risen recently (2.43% yoy in Feb). investors factor in a higher inflation premium.
2007=100
130 % Government bond yield curve had bear-flattened
120 4.0
3.8
110
3.6
100
3.4
90 3.2
80 3.0
2.8
70
2.6
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 TTM
2.4
FB CF HF HP TC RR TA 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y
01-Mar-11 31-Jan-11
FB – Food and beverages CF – Clothing and footwear
HF – Housing and furnishing HP – Healthcare and personal care
TC – Transport and communication TA – Tobacco and alcohol
RR – Recreation, reading, education and religion
Our concern for the local price levels stems not only from
the rising global food and commodity prices but also from
expectations at home. Recent news reports show the
government is planning on increasing the minimum wage
further by about 25% over the next two years, as an
attempt to help push forward overall competitiveness in
the long-run by urging businesses to invest in innovation
and cost-lowering production methods. While the need to
raise Thai wages continue, market signaling should be
done with caution as retail prices may rise too quickly in
anticipation of the higher nominal income.
We expect the BoT to remain extra vigilant against
inflationary pressure build-up until the year 2012 and
such caution may lead to policy rate hikes that could be
more than we had penciled in (3.25% by year-end).
Nevertheless, the management of expectations and the
Ministry of Commerce’s price regulation could help to
smooth out price volatility if done appropriately.
Local interest rate movements
%
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
04 05 06 07 08 09 10 11
avg MLR Fixed 1Y deposit Repo
The 4-bank average time deposit rate for 1-year tenor
increased from 1.49% at the end of the year 2010 to
1.70% as of end March 1st. Meanwhile, the 4-bank
average minimum lending rate rose from 6.12% to 6.37%
during to same period.
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 6

6. Economic Update
2010 2010 2011
Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11
The Real Sector (%yoy , unless specified otherwise)
Manufacturing Production Index, seasonally adjusted (level) 188.7 182.1 189.1 187.9 189.1 190.8 192.4
Manufacturing Production Index, without seasonal adjustment (level) 190.1 183.7 201.5 191.2 190.4 188.4 186.3
Manufacturing Production Index, without seasonal adjustment 13.1 8.4 8.1 6.0 5.7 -3.4 3.7
Industrial Capacity Utilization (%) 64.8 63.6 64.4 63.9 63.6 62.4 62.1
Private Consumption Indicators
Retail Sales (at 2002 prices) 12.5 8.2 9.1 5.2 8.0 7.1 n/a
Passenger Car Sales (units) 74.3 59.4 45.8 43.2 40.9 28.5 49.6
Motorcycle Sales (units) 34.2 20.0 9.3 2.0 9.3 18.2 7.5
Imports of Consumer Goods (at 2000 prices) 13.5 27.4 9.2 11.3 16.9 12.7 22.0
Private Investment Indicators
Commercial Car Sales (units) 37.0 46.4 35.6 28.9 36.3 29.8 29.0
Imports of Capital Goods (at 2000 prices) 27.9 32.0 21.7 11.6 20.5 13.8 30.5
Cement Sales (tons) 3.5 -4.5 3.7 -7.4 -1.8 -0.3 4.4
Government Cash Balance (billions of baht) -56.3 -0.1 67.4 -76.0 -104.0 -14.0 -120.4
Consumer Price Index 3.4 3.3 3.0 2.8 2.8 3.0 3.03
Food 6.9 7.5 6.6 5.5 5.8 5.6 5.94
Non-Food 1.4 1.0 0.9 3.7 1.1 1.6 1.34
Core Inflation (excluding raw food and energy) 1.2 1.2 1.1 1.1 1.1 1.4 1.32
External Accounts (Millions of US$, unless specified otherwise)
Exports 16,292.0 17,955.0 17,046.0 17,584.0 17,220.0 15,475.0 16,523.0
( %) 23.6 21.8 16.6 28.7 18.6 21.2 21.4
Imports 15,440.0 14,712.0 14,773.0 17,094.0 15,911.0 16,266.0 17,111.0
( %) 41.8 15.7 14.4 35.0 8.8 36.5 31.2
Trade Balance 852.0 3,243.0 2,273.0 490.0 1,309.0 -791.0 -588.0
Current Account Balance -1,001.0 280.0 2,767.0 2,740.0 1,019.0 1,750.0 1,090.0
Net Capital Flow 2,980 3,206 1,126 2,405 -182 1,219 985
Monetary authorities 261 149 409 200 -34 1,151 1,561
Government 423 901 584 443 -152 34 232
Bank 524 1,859 486 3,976 709 -1,121 1,634
Others 1,772 297 -354 -2,215 -705 1,155 -2,441
Balance of Payments 1,412 3,589 4,270 5,822 820 2,263 1,689
Official Reserves (billions of US$) 151.5 155.2 163.2 171.1 168.0 172.1 174.0
Monetary Statistics (End of period) (Billions of baht)
Monetary Base 1,066.9 1,045.6 1,118.1 1,072.2 1,109.9 1,243.3 1,233.8
( %) (11.3) (8.0) (13.7) (9.6) (9.3) (12.7) (17.5)
Narrow Money (M1) 1,173.0 1,181.4 1,175.5 1,202.3 1,235.4 1,302.4 1,326.7
( %) 15.8 11.4 11.7 11.4 10.8 10.9 15.6
Broad Money (M2) 10,887.1 10,968.1 11,116.1 11,323.3 11,501.6 11,775.4 11,818.5
( %) 8.7 8.4 9.8 11.1 11.1 11.0 11.5
Other Depository Corporations Deposits 9,974.5 10,015.9 10,091.6 10,204.1 10,389.3 10,583.4 10,607.0
( %) 7.6 6.6 7.8 8.5 8.1 8.7 8.9
Other Depository Corporations Private Credits 9,219.7 9,299.8 9,432.7 9,580.5 9,743.9 9,934.3 10,058.9
( %) 9.1 9.8 10.8 12.1 12.2 12.5 14.4
Interest Rates (% p.a.)
Repurchase Rate, 1 day (closing rate daily average) 1.56 1.75 1.75 1.75 2.00 2.18
Overnight Interbank Rate (mode daily average) 1.27 1.43 1.62 1.62 1.62 1.88 2.06
Fixed Deposit Rate (1 year) 1.00-1.25 1.00-1.25 1.10-1.43 1.10-1.50 1.10-1.50 1.40-1.70 1.60-1.85
Prime Rate (MLR) 6.00-6.38 6.00-6.38 6.00-6.38 6.00-6.38 6.00-6.38 6.12-6.50 6.37-6.75
Exchange Rate (Baht : US$) 32.33 31.74 30.83 29.97 29.89 30.12 30.57
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 6 of 6