Production side
Agricultural sector grew by 0.2 percent owing to an increase in production of oil palm, paddy and rubber plantations, by 1 5 .7 , 4 .2 and 3 .3 percent respectively. Notably, the growth of oil palm and rubber production was partly contributed by the expansion of cultivated areas. The growth in rice production was essentially due to a higher price expectation, which reflected through an increase in off-season rice production. Meanwhile, crop prices recorded a considerable growth of 16.9 percent, particularly the rubber price which skyrocketed by 110.7 percent. A boost in rubber price was a result of the domestic and world economic recovery which, in turn, pushed the demand of rubber in the automobile sector and its related industries especially in China. Paddy price also surged by 8.2 percent, mostly due to the supply disruption as a result of the drought in major exporting countries such as India and Philippines. Thus, those countries inevitably needed to import rice from Thailand. Livestock price also rose by 1 1 .3 percent, particularly the prices of swine and chicken, whose production were limited due to a higher cost of production. In summary, such expansions in price and production of major agricultural products contributed to a 19.3 percent growth in farm income.
"...Trade Balance remained surplus, however, decelerated from the previous quarter..."
"...Agriculture sector grew by 0.2 percent while crop prices expanded notably. Thus, farm income experienced considerable growth..."
Manufacturing sector grew by 2 2 .8 percent, considerably up from 9 .9 percent in the previous quarter. Such expansion was mainly influenced by the recovery of both domestic and global economies. Accordingly, the export-oriented industries substantially rose by 49.6 percent while export of manufacturing products also recorded an impressive growth of 41.8 percent. Those well-performed industries included (i) frozen seafood and canned seafood industries registered an expansion of 12.7 and 23.8 percent respectively, (ii) the automobile industry and transportation equipments recorded a growth rate of 86.6 and 52.2 percent respectively, (iii) electrical appliances and electronic products consecutively expanded for the forth quarter with a rate of 60.7 percent amid a demand surged from China, which has set itself to become the world largest manufacturing-base of electronics. The domesticoriented industries also experienced a remarkable expansion following the recovery of domestic demand. In particular, iron and steel products and construction materials, which directly benefited from expansion in private construction, grew by 62.5 and 8 .4 percent respectively. Meanwhile, rubber and rubber products expanded by 20.2 percent amid the recovery in automobile industry.
"...The industrial sector accelerates according to the world and the domestic economic expansion..."
At the end of quarter, capacity utilization stood at 68.4 percent, improved from 66.0 percent in the previous quarter. Major industries that expanded their production capacity were food (83.4 percent from 60.9 percent), rubber and rubber products (68.6 percent from 62.2 percent), iron and steel products (58.6 percent from 54.9 percent), and automobile and transportation equipments (72.8 percent from 69.9 percent). Whereas, several industries such as footwear products (40.6 percent), leather products (29.8 percent) and furniture (27.8 percent) continually operated under 50 percent of their capacity.
Construction sector grew by 5.2 percent, mainly driven by private construction following the recovery in domestic economy. Additionally, the expansion can be seen in sales volume of construction materials such as cement (7.2 percent), steel bar (11.5 percent), and wire rod (25.0 percent). Meanwhile, the permitted area for construction rose by 35.4 percent, the second month in a row. Such expansion was attributed by 3 5.8 and 3 7 .9 percent growths of residential and commercial construction respectively. Regarding residential construction, the expansion can be observed in all major categories including single house, townhouse, and condominium. For commercial construction, the expansion was mainly concentrated in the development of retail trading, especially in form of small retail and community mall. Such action was driven by the recovery of consumer demand in tandem with the adjustment of marketing strategies in which a small discount store has become more suitable to consumer lifestyle.
Construction materials price index slightly rose by 0.7 percent. Such growth was mainly contributed by a 4.0 percent increase in prices of steel in line with the world market. On the contrary, prices of concrete and cement declined by 7.9 and 2.2 percent respectively.
"...The construction and real estate sectors expand according to the expansion of the private construction and the government measure to stimulate the real estate sector..."
Real estate sector grew by 3.9 percent, slightly improving from 1.9 percent in the previous quarter as a result of economic recovery and the government measures to stimulate demands for the real estates. Moreover, the housing developer sentiment index (HSDI) appreciated from 57.8 in the previous quarter to 59.0 in this quarter, reflecting a better confidence of real estate developer. Consumer confidence also improved, witnessed by an expansion of 10.7 percent in housing loan.
Hotels and restaurants expanded 15.5 percent compared to the same period of last year following the economic recovery of major counterparts such as China, Taiwan, and Japan. Number of tourists in the first quarter was 4.7 million persons, considerably expanded by 2 8 .4 percent. Average occupancy rate was 6 0 .7 percent, up from 5 4 .1 percent in the previous quarter. In addition, average room rate also rose by 37.1 percent; the increasing rates were revealed in all area but the central region. Nevertheless, number of tourists in March started to slow down, decreasing from 41.9 percent in February to only 18.0 percent. Such decline was mainly due to the political protest within the metropolitan area which commenced since the 12th of March. In addition, several countries have already issued a warning, suggesting their citizens to avoid travelling to Thailand.
"...The tourism sector grows at a good pace which has the total number of tourists in this quarter of 4.7 million and this is the highest figure in history..."
Employment in the first quarter was 37.4 million persons, up by 2.6 percent compared to the same period of last year. Sectors with an increase in employment include hotel and restaurant (10.3 percent), wholesale and retail (3.0 percent), both of which partly benefited from the expansion in tourism sector. On the other hand, sectors with a decrease in employment include manufacturing and construction which registered contractions of 1 .1 percent and 1 .2 percent respectively. Number of unemployment in the first quarter was 426,000 persons, considerably declined from 780,000 persons (or down by 44.4 percent) compared to the same period of last year. Therefore, the unemployment rate stood at 1.1 percent while the number of registered persons claimed for unemployment compensation substantially declined by 49.1 percent. Nevertheless, the employment situation started to tighten. For the first two months of 2010, the ratio of vacancies and registered applicants was 0.9, indicating an almost equilibrium in labor market. As a result, labor shortage could be observed in several industries such as automobile, electronics and textile.
"...The employment increases while the unemployment rate decline to 1.1 percent..."
Fiscal condition:
Fiscal balance: In the second quarter of fiscal year 2 0 1 0 (January - March 2 0 1 0 ), government revenue was 326,509 million baht, exceeded the target by 61,220.9 million baht or 23.1 percent. The higher-than-expected collection was attributed to an increase in value added tax (VAT) and excise taxes on oil and automobile. For the first half of fiscal year 2010 (October 2009 — March 2010), revenue collection has exceeded the target by 128,896 million baht which equivalent to 23.6 percent. On expenditure side, the total budget disbursement was 432,473 million baht, equivalent to 25.4 percent of the annual budget (1,700,000 million baht). The current disbursement level was proved to be higher than 23 percent target set by the cabinet. Comprise of, the current budget has been disbursed by 24.7 percent of total current budget while the capital budget has been disbursed by 30 percent of total capital budget, given the target for capital budget disbursement at 2 1 percent. Regarding the SP2, the disbursement of investment projects during the second quarter of fiscal year 2010, was 70,781.9 million baht, equivalent to 26.6 percent of total allocate budget (2 6 5 ,9 7 9 million baht). For the first half of fiscal year 2 0 1 0 , the total disbursement under SP2 was 105,806 million baht, equivalent to 39.8 percent of total allocate budget. In sum, the budget balance in the second quarter of fiscal year 2010 recorded a deficit of 169,112 million baht, while the non-budgetary balance registered a surplus of 22,351 million baht. Given the issuance of 95,000 million baht on government bonds and treasury bills to finance deficits, therefore, the cash balance registered a deficit of 5 1 ,762 million baht. The treasury reserves at the end of March 2 0 0 9 concluded at 118,551 million baht.
"...Government revenue collection was remarkably above the target especially in consumption-based taxes that was attributable by economic recovery, similar to disbursement level that was higher than target..."
Public Debt at the end of February 2010 stood at 4,075,144 million baht, equivalent to 41.9 percent of GDP, increased from 3,967,155 million baht at the end of December 2009. The increase in public debt was due to increase in direct government borrowing in domestic market in order to finance budget deficit, debt management, SP2 , and to compensate FIDF’s loss.
"...The treasury reserves posted at strong position and public debt equaled to 41.9 percent of GDP,..."
Financial Condition:
Headline inflation: average headline inflation in the first quarter was 3.8 percent, which remained in a positive territory for two consecutive quarters. The acceleration was attributed by the increase of 4.3 percent in food and beverage price index and 3.5 percent in non-food and beverage index. Meanwhile, producer price index recorded at 12.0 percent, remained in positive territory for two consecutive quarter. The rising of producer price index was contributed by an increase in price of agricultural (21.8 percent), mining (11.4 percent), and manufacturing products (9 .7 percent). This has put pressure toward production cost especially on petroleum products and rubber and rubber products due to an increase in demand from automobile industry following a recovery in global economy and purchasing orders
"...Headline inflation in Q1 was at 3.8 percent..."
Policy rate kept unchanged. During the first quarter, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 1 .25 percent per annum. The decision was made in order to support gradual recovery of the Thai economy, while the heightened political risk remained a key obstacle clouding the economic growth outlook. Similarly, policy rate in most of the countries were kept unchanged except India, Australia, and Malaysia where the policy rate was adjusted upward. Nevertheless, sign for monetarypolicy tightening was experienced in many countries for example, China has raised bank reserve requirement ratio and directly withdrawn capital from the market through open market operation , and the Philippines has reduced budget on repurchase agreement transaction.
Commercial banks’ interest rate remained low. At the end of the first quarter, an average of 12-month deposit rate slightly declined from 0.70 percent to 0.68 percent per annum. On the other hand, MLR lending rate remained stable at 5.86 percent per annum. The real deposit and lending rate continued to decelerate to -2.73 and 2.46 percent per annum, respectively, caused by inflation rate hike. Even though, real deposit rate has entered its negative zone for two consecutive quarters but there was still no sign of overheating in real estate market, which experienced a continual decline in price index since 2009.
"...Policy rate in Thailand and in several countries remained unchanged to accommodate economic recovery..."
Commercial banks’ deposits including bill of exchange (B/E) expanded by 1.1 percent, slightly decelerated from 1.2 percent expansion in the previous quarter. This resulted from growing appetite for higher yield investment, like bill of exchange (B/E), in the current low interest rate environment. Depository Institutions’ loan expanded at a faster pace, from 6.9 percent at the end of the previous quarter to 10.6 percent at the end of current quarter, owing to the household loan expansion, especially in housing loans and loan for purchase or hire purchase of cars and motorcycles. Corporate loan contracted by 6.5 percent, slightly improved from a contraction of 8.3 percent posted in the previous quarter. Such improvement was attributed to positive outlook over economic recovery path. Credit card spending expanded at a slower pace, but remained higher than the expansion rate in the first quarter 2009. Cash advance has improved significantly. High expansion rate experienced in both credit card spending and cash advance was mainly attributed to the improved consumer confidence over economic prospect. In addition, NPLs3 to outstanding loan has continually curved down to 2.5 percent from 2.6 percent in the previous quarter. Moreover, excess liquidity in commercial banking system accelerated from 1.32 trillion baht to 1.45 trillion baht at the end of the current quarter. This was attributed to a strong expansion in the issuance of Government and Monetary Authorities bond and net R/P position.
"...Commercial banks’ deposits and B/E slowed down. Depository Corporations’ loan expanded at a faster pace by accelerated household credits, while corporate loan contracted at a slower pace. Excess liquidity in commercial bank system remained ample
"...Current Account remained surplus and international reserve at the end of April 2010 stood at 147.58 billion US dollars..."
- Current account in the first quarter registered a surplus of 5.25 billion US dollars which was equivalent to 172.51 billion baht, continued surplus from the previous quarter which registered a surplus of 4.27 billion US dollars. This was attributed by trade balance surplus of 2.13 billion US dollars and net service, income and transfer surplus of 3.12 billion US dollars.
- Capital and financial account recorded net inflow.4 In the first quarter, capital and financial account recorded a net inflow of 6.1 billion US dollars, increased from 2.6 billion US dollars in the previous quarter. The net inflow was mainly contributed by inflow from portfolio investment, total of 1.4 billion US dollars, and inflow from foreign direct investment that continue to increased.
- International reserve at the end of April 2010 stood at 147.6 billion US dollars (excluding Net Forward Position 11.9 billion US dollars), which was equivalent to 5.3 times of short-term foreign debt or 9.8 months of import.
- Thai baht continued to appreciate against US dollar. An average exchange rate in the first quarter of 2010 was at 32.84 baht per US Dollar, appreciated by 1.28 percent from the previous quarter and 6.99 percent from the same period of last year. Thai baht continued to appreciate against US dollar due to inflow of investment capital in response to economic recovery. Furthermore, Thai baht appreciated against other regional currencies including that of export-competing-countries, as a result, nominal effective exchange rate (NEER) and real effective exchange rate (REER) increased by 2.40 and 2.39 percent respectively. In April 2010, Thai baht continually appreciated to an average of 32.24 baht per US dollar, an average exchange rate over period of 1st — 18th May was at 32.28 baht per US dollar.
- SET index performance improved. At the end of the first quarter, SET index closed at 788.0 points, increased by 7.3 percent from the previous quarter. Such improvement was caused by inflow of foreign capital, following recovery of domestic and regional economy. On the contrary, daily average trading volume was at 19.1 billion baht, slightly decreased from 20.0 billion baht in the fourth quarter of last year. During April through 19th May, SET index performance was continually suppressed by heighten political risk, as a result, SET index, at the end of 19th May, closed at 765.54 points. Moreover, daily average trading volume was at 14.3 billion baht and foreign investors posted a net sell of 42.8 billion baht.
- Bond trading volume escalated. Daily average outright trading in the first quarter was 61.4 billion baht, increased from the fourth quarter of 2009. The government bond yield, with medium to long term maturity, declined from the previous quarter. The downward pressures were created by (i) decline of government bond supply in primary market and (ii) market expectation on delay of policy rate hike. On the contrary, foreign investors’ recorded a net sell of 23.8 billion baht. In April, investor has shifted their investment to bond market to lessen exposure to country risk as political uncertainty heightened. As a result, daily average outright trading volume was recorded at 70.6 billion baht while foreign investors recorded a net buy of 10.6 billion baht and the government bond yield decreased in all maturity.
"...International reserve at the end of April 2010 stood at 147.58 billion US dollars..."
"...Thai baht appreciated against US dollar and export-competingcountries, NEER and REER increased..."
"...SET performance improved in response to Asian economic recovery..."
- Corporate fundraising heightened. Private fundraising totaled at 232.1 billion baht, increased from 202.9 billion baht in the same period of last year. Fundraising through equity securities was 31.4 billion baht, mainly from production and financial intermediation sectors. Meanwhile, debt securities issuance recorded at 200.7 billion baht, with most of the issuance from real estate sector. This was resulted from high cost of commercial banks’ long term credit and tight credit approval standard.
"...Corporate fundraising in capital market heightened, particularly debt securities of real estate sector..."