(Update 5)ECONOMIC OUTLOOK THAI ECONOMIC PERFORMANCE IN Q1 AND OUTLOOK FOR 2009

• Liquidity and excess liquidity in commercial banking system(B) accelerated. Credits (exclude repurchase position with the Central Bank) to deposit (include bill of exchange) ratio decreased form 87.3 percent to 83.4 percent, resulted from slow down in credits that was greater than slow down in deposits. This is consistent with acceleration of excess liquidity in commercial banking system (include repurchase position with the Central Bank) which was approximately at 1.39 trillion baht at the end of the first quarter, equivalent to 26.8 percent expansion compare to the same period last year. This was mainly attributed to expansion of repurchase position with the Central Bank. However, the liquidity in commercial banking system will be tightened at the end of the year because: 1.) greater demand on capital by

• The ratio of NPLs to credit outstanding increased. NPLs in financial institutions (excluding BIF and credit fanciers) had increased to 230.18 billion baht at the end of first quarter, equivalent to that private sector started to experience liquidity shortage from reduction in sale

• Commercial banks earning increased. Net profit of commercial banking system was at 19.5 billion baht, increased by 7.3 billion baht from the last quarter. The advance in earning were attributed to 1) an increase in non-interest earning, especially in foreign exchange transactions and 2) reduction in reserve requirement for bad debts from decline in credit outstanding. However, interest revenue was decrease; confirmed by decline in net interest margin (NIM) from 3.36 percent to 2.95 percent annually. Net profit in the first quarter of 2009 compare with the same period of last year decreased by 6 billion baht from lower income, both interest income and dividend account and non-interest income account.

                    - Thai baht depreciated both in nominal and real effective terms. An average exchange rate in the first quarter of 2009 was at 35.31 baht per Us Dollar, depreciated by 1.54 percent from the previous quarter. While, deeper depreciation was recorded, 8.09 percent, if compare with the same period of last year. Depreciation of Thai baht and regional currencies caused by shift in investment toward safer currency, like US dollar. This movement was intensified as US financial situation had improved and promptly action by US government to stimulate economic activities and address liquidity problem. Comparing Thai baht against other currencies, Thai baht significantly appreciated against Pound Sterling and most regional currencies except Japanese yen, Hong Kong dollar, Philippine peso, EURO and Chinese RMB. Therefore, average nominal effective exchange rate (NEER) and real effective exchange rate (REER) slightly depreciated by 0.25 and 0.28 percent respectively regarding the forth quarter of 2008. From April to 15th May, the average
exchange rate was at 35.20 baht per US dollar, slightly appreciated from the average in the first
quarter. Partially from surplus in current account and the increase in net buy from foreign investors in SET
index.
                    - SET index and trading volume continually declined. In the first quarter, average daily trading value was 8.65 billion baht, declined from average 12.61 billion baht in the fourth quarter last year. Throughout the first quarter, SET index fluctuated in range of 411.27 — 478.69 points inline with oversea stock markets. During January through to February, SET index continued to drop as fear of steep contraction in world economic had increased. This perception has dampened investors’ confidence, which drive investor toward safer assets like US dollar, bond, and gold. In the first quarter, foreign investor recorded a net sale of 5.55 billion baht declined from 37.22 billion baht in previous quarter owed to net buy position in March. The switch in investment pattern in March caused by: 1) investors believed that the financial crisis has bottomed out and the world economic recovery will faster than previously expected, as many economic indicators has improved, and 2) US financial bailout package and stimulus packages, release by both developed and developing countries, had shed light over investors’ confidence. Both factors mention above remain a key driver till now. At the end of the first quarter, SET index closed at 431.50 points slightly dropped from 449.96 points at the end of the fourth quarter last year. At 15 may 2009, SET index closed at 533.92 points equivalent to 24 percent spike from the  end of March. Average trading volume (1 April — 15 May, 2009) increased to 19.4 billion baht.
                    - Bond trading increased. Daily average outright trading in the first quarter slightly increased to 68.1 billion baht from 65.7 billion baht in the forth quarter of last year. Slight escalation in trading volume caused by increasing amount of government bond in primary market and rearranging of portfolio investment from stock markets and saving accounts. Government bond yield spread fluctuated in narrower range. Bond yields for maturity was less than 3 years declined by 9 - 48 basis points concurrent with policy rate cut. However, medium - long terms maturity bonds yields increased by 8 — 36 basis
points as investors expect increase in issuance of government bond to support government investment in
the second quarter onward. Thus, medium — long terms bonds investment was deferred in the first quarter. Net
sell of foreign investors recorded at 1.95 billion baht, compared to net buy of 4.04 billion baht in the last quarter. During 1st of April to 15th of May 2009, daily average outright trading was at 69.6 billion baht resulted from higher trading volume by foreign investors.
                    - Corporate fundraising decreased significantly from the same period of last year, while role of debt security had increased. In the first quarter private fundraising was at 199.8 billion baht, compared to 317.4 billion baht in the same period of last year. Fundraising through equity securities declined from 22.5 billion baht to 10.5 billion baht. On the other hand, debt securities issuance notably increased to 79.59 billion baht from 39.92 billion baht in the previous quarter. This is due to credit rating of large corporation still remaining high and tighter lending practices by financial institution. Most debt securities issuances were from energy and real estate sector. Meanwhile, financial sector fundraising had declined because of sound cash flow and high level of disposable liquidity.

          -Trend of oil price
          - World crude oil price: continue to decline. In the first quarter of 2009, average world crude oil price (Dubai, Brent, Oman, and WTI) was at 44.3 US dollar per barrel, declined by 53.2 percent from the same period of previous year, which was decreased for four consecutive quarters(C) . Reflecting the impact of the economic turmoil, many countries confronted with economic recession, as global demand has contracted in parallel with global oil production in the first quarter decreased further than expected. According to the increasing in the oil production of non OPEC country such as North Sea countries, Former Soviet Union (FSU), and Latin America. In this quarter , non OPEC count ry produced oil at the average of 50.28 million barrel per day, more than EIA estimated by 0.7 million barrel per day. Moreover, the declined in OPEC oil
production was not reached the target of the consensus of the OPEC meeting(D) . In the first quarter,
OPEC (11)(E)  produced oil at the average of 25.92 million barrel per day, while the set target was at 24.85 million barrel per day. This affected to a surplus in crude oil stock.

                (D) In OPEC meeting on 17th December 2008, OPEC made a consensus to reduce oil production of OPEC (11) in September 2008 to 4.2 million barrel per day from 29.05 million barrel per day, effective on 1 st January 2009. The latest meeting on 15th March 2009, OPEC decided to maintain the level of oil production at 24.85 million barrel per day.
                (E) OPEC country (12): Algeria, Angora, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. OPEC country

                    - Domestic retail petrol prices decreased in tandem with world oil price. In the first quarter of 2009 domestic retail price of all petroleum products decreased. Retail Benzene 95 and 91 prices were at 32.95 and 25.22 baht per litre, decreased by 1.3 percent and 21.7 percent in the same period of
previous year respectively. Gasohol 95 and 91 prices stood at 20.88 and 20.06 baht per litre, decreased by 28.9 percent and 29.8 percent respectively. High speed diesel and bio-diesel (B5), average price were 19.74 and 17.90 baht per litre, decreased by 33.7 and 38.3 percent respectively.

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