Hotels and Restaurants expanded by 10.1 percent compared to the same period of last year. The number of inbound tourists in this quarter stood at 3.7 million persons, accelerated from the previous quarter by 12.5 percent. This significant improvement was due to increased number of tourists from Asian countries particularly China, Malaysia, and India by 78.7, 26.9 and 28.1 percent respectively. As a result, average occupancy rate registered at 48.4 percent, up from 47.2 percent in the same period of last year.
"....Hotels and Restaurants expanded by 10.1 percent. The number of inbound tourists in this quarter stood at 3.7 million persons, accelerated by 12.5 percent due to increased number of tourists from Asia...."
Tourism sectors have shown signs of strong recovery from political unrest in the previous quarter. Promising signs of recovery in this quarter are as follows: (i) an increase in number of inbound tourists by 12.5 percent, accelerated from a contraction of 3.6 percent in the previous quarter; (ii) an average occupancy rate of 48.4 percent, accelerated from 39.3 percent in the previous quarter; and (iii) an increase in number of flights and passengers of Low-cost carriers (LCCs) by 13.9 and 26.7 percent respectively compared to the same period of last year. The number of tourists in the first three quarters stood at 11.2 million persons, accelerated from the same period last year by 13.3 percent.
Nevertheless, the number of tourists from Japan, United Kingdom, and United State in this quarter declined noticeably by 12.6, 9.9 and 8.1 percent respectively, as a result of an ongoing impact from economic crisis in Europe and United State in conjunction with impact from Shanghai World Expo 2010 (1 May — 31 October 2010). In conclusion, hotels and restaurants sector in the last nine months expanded by 8.6 percent.
Employment in the third quarter stood at 38.57 million persons1, increased by 0.1 percent compared to the same period of last year. Employment in non-agricultural sector grew by 2.3 percent particularly in public administration sector, wholesale and retail sector and construction sector which expanded by 18.4, 4.8 and 4.0 percent respectively. Similarly, employment in agricultural sector contracted by 3.2 percent, improved from 6.6 percent contraction in the previous quarter.
"...The Employment increased by 0.1 percent while the unemployment rate declined to 0.9 percent. Tension in labor market situation persisted since the beginning of the year.
Number of unemployment in this quarter stood at 349,000 persons, declined by 112,000 persons compared to the same period of last year (or down by 24.2 percent). Additionally, the unemployment rate stood at 0.9 percent, as a result, the number of registered persons claimed for unemployment compensation substantially dropped by 16.8 percent.
In addition, tension in labor market situation continued to linger as the ratio of vacancies to registered applicants remained constant throughout 2010 at 1.0, 0.7 and 1.0 in Q1, Q2 and Q3 respectively. Skill labor shortage can still be observed in numerous industries such as automobile and electronics.
Fiscal condition:
In the fourth quarter of fiscal year 2010 (July - September 2010), government revenue was 448,041.9 million baht, exceeded the target and previous year collection by 25.8 and 15.5 percent respectively. For fiscal year 2010 (October 2009 — September 2010), revenue collection was 1,678,911 million baht, exceeded the target by 328,912 million baht or 24.4 percent and higher than last year’s revenue collection by 19 percent as a result of strong recovery of Thai economy.
On expenditure side, the total budget disbursement was 419,153 million baht, equivalent to 24.7 percent of the annual budget, and slightly lower than the target of 26.0 percent. The current budget has been disbursed by 25.4 percent of total current budget while the capital budget has been disbursed by 19.8 percent of total capital budget. However, the total budget disbursement for fiscal year 2010 was 1,627,846.3 million baht, equivalent to 95.8 percent of the annual budget, higher than a target of 94.0 percent.
Regarding the Stimulus Package 2 (SP2), the disbursement of investment projects during the fourth quarter of fiscal year 2010, was 55,531.7 million baht, equivalent to 17.3 percent of total allocated budget (320,760.9 million baht). For fiscal year 2010, the total disbursement under SP2 was 219,515.5 million baht, or 68.4 percent of total allocated budget.
"...Government revenue collection exceeded the target, due to economic expansion. Budget disbursement was slightly higher than target. ..."
"...For fiscal year 2010, the total disbursement under SP2 was at 68.4 percent of total allocated budget. ..."
Fiscal balance in the fourth quarter of fiscal year 2010, the budget balance recorded a deficit of 15,900.9 million baht. Adding on, a surplus in non-budgetary balance of 82,211.5 million baht and the issuance of government bonds and treasury bills of 3,003.0 million baht, the government cash balance in the fourth quarter of fiscal year 2010 recorded a surplus of 69,313.5 million baht. For fiscal year 2010, the government registered cash deficit of 97,088.0 million baht. Furthermore, the government borrowed in order to finance budget deficit in the amount of 232,575.0 million baht, thus total cash balance after debt financing registered a surplus of 135,487.0 million baht. With the beginning balance of 293,835.0 million baht, the treasury account at the end of September 2010 closed at 429,322.0 million baht.
"...Fiscal condition remained sound with public debt per GDP at 42.7 percent. ..."
Public Debt at the end of August 2010 stood at 4,266,701.3 million baht, equivalent to 42.7 percent of GDP, slightly increased from 4,144,260.8 million baht at the end of June 2010. The increase in public debt was due to an increase in direct government borrowing in domestic market in order to finance budget deficit, debt management and the SP2 project.
Budget Expenditure Framework in Fiscal Year 2011
Budget expenditure framework in fiscal year 2011 (October 2010 — September 2011) amounts to 2,070,000 million baht, comprises of: (i) current expenditures of 1,662,604 million Baht or 80.3 per cent of the total budget; (ii) capital expenditures of 344,495 million baht or 16.6 percent of the total budget; (iii) principal repayment of 32,554 million baht or 1.6 percent of the total budget and; (iv) compensation to the treasury account of 30,346 million baht or 1.5 percent of total budget. The government also targeted the disbursement rate for total budget at 93.0 percent, given the capital disbursement rate of 72.0 percent and SP2 disbursement rate at 100.0 percent.
Financial Condition:
Policy rate slightly increased. During the third quarter, the Monetary Policy Committee (MPC) decided to raise the policy interest rate by 50 basis points, from 1.25 percent per annum as of June 2010 to 1.75 percent per annum as of September 2010. The decision was made in tandem with strong recovery of Thai economy, while inflationary pressure is expected to rise in the near future. Similarly, policy rate in many Asian countries were revised upward following strong economic recovery. In October 2010, China raised the policy interest rates by 25 basis points from 5.31 to 5.56 percent per annum. Likewise, Taiwan adjusted the policy interest rate from 1.275 to 1.50 percent per annum in order to curve down inflationary pressures following economic recovery. On the other hand, Bank of Japan decided to lower the policy interest rate from 0.1 percent per annum to a range of between 0 and 0.1 percent per annum in order to stimulate domestic economy, while lowering the appetite for yen.
"...Policy rate was in upward trend following better economic prospect and upward inflationary pressure. ..."
Commercial banks’ interest rate remained low. At the end of the third quarter, an average of 12-month deposit rate and MLR lending rate remains stable at 1.12 and 6.00 percent per annum. The real deposit and lending rate slightly increased to -2.18 and 3.00 percent per annum, respectively.
"...Deposit rate and lending rate remained stable. ..."
Depository corporations’ deposits including bill of exchange (B/E) expanded by 9.7 percent, compared to an expansion of 6.4 percent in the preceding quarter. In particular, Bill of exchange (B/E) accelerated by 36.0 percent, partly due to growing appetite for higher yield investment in the current low interest rate environment and low base effect form last year. Similarly, private loan (excluding accrued interest) of depository corporations expanded at a faster pace, from 8.5 percent at the end of previous quarter to 10.7 percent at the end of the current quarter, owing to the household loan expansion, especially in loan for purchase or hire purchase of cars and motorcycles. On the other hand, loan for dwelling grew at a slower pace following termination of real estate stimulus package measure at the end of June 2010. Corporate loan improved in all sectors in tandem with economic recovery. In addition, number of credit cards and credit outstanding increased in line with recovery in credit card spending. Meanwhile, NPLs to outstanding loan continually curved down to 2.3 percent from 2.4 percent in the previous quarter, mainly due to principle repayment, debt restructuring and selling of debt.
"...Depository corporation’s’ deposits accelerated. Similarly, private loan expanded at a faster pace owing to expansion of loan for purchase or hire purchase of cars and motorcycles. ..."
Commercial banks’ credit (excluding repurchase position (R/P)) to deposits (including B/E) ratio slightly declined form 91.0 percent at the end of the second quarter to 90.5 percent at the end of the current quarter, following acceleration in deposits. Consequently, excess liquidity in commercial banking system rose from 1.18 trillion baht to 1.26 trillion baht, especially in government & BOT bond and net R/P position.
Thai baht continued to appreciate against US dollar. An average exchange rate in the third quarter of 2010 was 31.562 baht per US dollar, appreciated by 2.40 percent from the previous quarter and 6.93 percent from the same period of last year. Thai baht continued to appreciate against US dollar due to the inflow of investment capital in response to Asian economic recovery, under the market expectation of the Federal Reserves’ new round of quantitative easing measure (QE2).
Furthermore, Thai baht appreciated at a slower pace against other regional currencies including that of export-competing-countries. Nominal effective exchange rate (NEER) and real effective exchange rate (REER) increased by 0.23 and 0.01 percent.
"...Increase in excess liquidity due to government & bank of Thailand bonds, and Net R/P Position. ..."
"...Thai baht continued to appreciate following increased in capital inflow. ..."
In October 2010, Thai baht rapidly appreciated to an average of 29.921 baht per US dollar, an average exchange rate over period of 1st — 19th November was at 29.736 baht per US dollar.
Capital and financial account recorded a net inflow. In the third quarter, capital and financial account recorded a net inflow of 8.1 billion US dollars, increased rapidly from 1.4 billion US dollars in the previous quarter. The net inflow was mainly contributed by inflow from banking sector, accelerated from 2.1 billion US dollars to 3.1 billion US dollars, and non-bank sector, shifted from outflow of 1.9 billion US dollars to an inflow of 1.3 billion US dollars
Current account in the third quarter registered a surplus of 2,047 million US dollars which was equivalent to 101,291 million bath, a continued surplus from 1,698 million US dollars in the previous quarter. This was attributed by trade balance surplus of 3,303 million US dollars and income and transfer deficit of 1,256 million US dollars.
"...The net flow increased rapidly in both banking and non-banking sector. ..."
"...Current account continued surplus from the previous quarter. ..."
International reserve at the end of October 2010 stood at 171.1 billion US dollars (excluding Net Forward Position of 12.6 billion US dollars), which was equivalent to 4.6 times of shortterm foreign debt and 3.7 months of imports.
Headline Inflation: the average headline inflation in the third quarter of 2010 remained constant from the previous quarter at 3.3 percent as a result of an increase in price of fresh products (particularly in fruits, vegetables and consumer goods). Such rising in price was mainly caused by the destruction of agricultural area due to heavy rain which resulted in lower crop yield and the end of harvest seasons for some seasonal fruits. Food and beverage price index escalated by 7.0 percent. While non-food and beverage price index increased slightly by 1.1 percent, mainly due to higher water supply charge due to the termination of water supply subsidy from the government since April, 1. In this quarter, core inflation rate was at 1.1 percent, increased from 0.9 percent in the previous quarter. This reflects in the upward trend of most commodities’ prices excluding fresh food and energy.
Producer price index in the third quarter of 2010 rose by 10.3 percent, increased from 9.3 percent in the second quarter. This phenomenon was mainly attributed to higher prices of agricultural products as a result of lower crop production due to heavy rain and flooding while domestic and external demands remained high. This has put tremendous amount of pressure toward the production cost especially non-food raw materials and the price of consumer products especially fresh food. This may result in low profit margin of production and ultimately lead to an increase in price in 20115
SET index and trading volume significantly increased throughout the quarter. In the third quarter, SET index closed at 975.3 points, dramatically increased from 797.3 points (equivalent to 22.3 percent) in the previous quarter. Such remarkable improvement was contributed by: (i) better-than-expected regional economic outlook compared to the major industry economies; (ii) anticipated extra investment return from upward trend in regional currencies; (iii) lessen domestic political uncertainty. As a result, foreign investor recorded a net buy of 60.0 billion baht, compared to a net sell of 59.9 billion baht in the previous quarter. Average daily trading value accelerated from 21.4 billion baht to 35.6 billion baht. During October through 18th November 2010, SET index continually improved due to foreign capital inflow. Nevertheless, an increase in global economic volatility has caused SET index to close at 1,004.7 points slightly dropped from peak at 1,049.8 points (8th November). Average trading value was 38.4 billion baht and foreign investors’ net buy value of 9.2 billion baht.
Bond market sentiment continually improved and foreign investors’ net buy value increased significantly. Daily average outright trading in the third quarter registered at 70.9 billion baht, increased from 64.8 billion baht in the second quarter. Government bond index increased from the previous quarter from tremendous improvement in demand, as witness in substantial amount of foreign investors net buy position (recorded at 131.2 billion baht). However, an increase of government bond index was limited by increasing supply, both government and Bank of Thailand bonds, under the interest rate hike environment. In October 2010, foreign investors continued to record a net buy. Daily average outright trading increased, while government bond index slightly dropped following a halt in policy rate hike and implementation of government’s measures on easing baht appreciation.
"...Daily average outright trading and government bond index improved. Foreign investors continued to record a net buy. ..."
Corporate fundraising slightly decreased from the same period of last year. Private fundraising totaled at 245.9 billion baht, slightly decreased from 254.2 billion baht in the third quarter of 2009. Debt securities issuance has dominated the private fundraising market, with a total of 224.2 billion baht. The majority of debt securities issuance came from financial intermediation, real estate and production sectors. Meanwhile, fundraising through equity securities remained high at 21.7 billion baht, compared with 2009 total equity fundraising of 29.5 billion baht. Most of equity securities were issued by Transport, storage and Transportation and production sectors. This reflected higher and broader investors’ confidence compared to the previous quarter, as most of the equity fundraising were concentrated in real estate sector.
"...Corporate fundraising remained high due to higher investors’ confidence. ..."
Oil price in Q3/2010
World crude oil prices slowed down due to high base effect from 2009. In the third quarter of 2010, an average world crude oil price (Dubai, Brent, Oman, and WTI) stood at 75.03 US dollars per barrel, increased by 9.8 percent) compared to the same period of last year of which the average price stood at 68.32 US dollars per barrel. The decelerated expansion was due to high base effect resulting from high demand and world economic recovery since the third quarter of 2009.
Oil price trend in 2010 and 2011
An average Dubai crude oil price in 2010 was expected to stand at 77 US dollars per barrel, higher than 61.60 US dollars per barrel in 2009. The average oil price in the first 10 months of 2010 was 76.23 dollars per barrel and stood at 81.75 US dollars per barrel on 18th of November 2010. Several institutions adjusted their WTI crude oil forecast. The Energy Information Administration (EIA) of USA expected that the average oil price of WTI would drop to 79 US dollars per barrel in 2010. Whereas Nomura of Japan revised its forecast upward to 85 US dollars per barrel in 2010 and expected the oil price in 2011 and 2012 to be 95 and 110 US dollars per barrel. The primary factor for higher oil price is the recovery of global economy. In addition, many institutions expected that the oil price would remain high due to higher demand during the winter session.
The average WTI oil price in 2011 would be higher than its price in 2010. The EIA expected that the average oil price in 2011 should stand at 85 US dollars per barrel while other institutions expected that the oil price in 2011 would be in the range of 80-100 US dollar per barrel, higher than the average price of 77 US dollars per barrel in 2010.
NESDB forecasts that the average Dubai oil price in 2011 would be in a range of 80 - 90 US dollars per barrel, higher than the average price in 2010. Key supporting factor was upward consumption in tandem with global oil demand.