Monthly Economics Insight...Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 2020 Previous Forecast Tourists Q1E Q2F Q3F Q4F 2020F Person 6.56 0.21 2.56 6.70 16.0 %yoy -39.2 -97.6

Monthly Economics Insight

1

Apr 23, 2020

TMB Analytics

Executive Summary

2

▪ The widespread of Covid-19 has caused major drops in economic activities around the world. Global uncertainties rose to the highest point since the 2008 financial crisis. U.S. recession is underway reflected by the unemployment data of more than 18 million unemployed people.

▪ European countries suffers from lockdowns as economic activities dropped to historic low. Most economies are in recession. China resumed to work close to the normal after the lockdown ended. Early data showed positive sentiments towards economic recovery. Japan’s service activities lost during the outbreak while retail sales returned positive since the tax hike in October last year

Global Economy

Domestic Economy

Financial Market▪ Fed introduced giant rate cut which caused other central bank to follow along. MPC, which held an emergency rate cut to 0.75, should have one more 25 bps

cut in the 2nd quarter to support the economy. Thai Baht continues its depreciating trend. ▪ Uncertainties regarding Covid-19 caused panic selling in global bond markets. Massive selloff in both Thai and U.S. government bond cause yield to spike

sharply. Rate cut and unconventional monetary policy should arrive to stabilize the market.

▪ Most of Thailand’s economic growth engines are facing sharp decline due to the pandemic, especially the external sectors which saw sharp contractions in inbound foreign tourists and merchandise exports. They are expected to reach the lowest point in Q2/2020 before recovery.

▪ Under the lockdown, domestic consumption contracted in many categories , while private investment showed sign of sharp contraction amid deteriorating business sentiment. The government spending was with low disbursement rate due to the persisting impact from delayed budget approval. However, the economic stimulus package came into play in order to alleviate the declined domestic activity.

▪ Headline inflation contracted due to the declined energy cost.

• Widespread of Covid-19 over the world has caused large drops in economic activities. As seen in the PMI indexes, both manufacturing and service sectors were hit hard in February.

• Global uncertainties rose as the virus containment remains far from reach and its overall impacts could be deep. The VIX uncertainties index rose highest in history, above 2008 financial crisis.

59.89

82.69

0

20

40

60

80

100

2006 2008 2010 2012 2014 2016 2018 2020

Volatility index rose above 2008 financial crisis

-4-20246

May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20

PMIs

Composite Manufacturing Services

MoM, deviations from 50, + expansion - contraction

Global PMI sharply contracted in February

Latest new cases happened over the world

COVID-19 pandemic sharp blow to the economy

4Sources: CEIC, Bloomberg, TMB Analytics

VIX index

03/2020, 4.4

-1,000-750-500-2500250500

3.4

3.6

3.8

4.0

4.2

4.4

Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

nonfarm payrollsunemployment rate

-701

%

Weekly jobless claim skyrocketed unprecedentedly

U.S. labor market longest expansion ended in March• Official labor statistics have revealed how severely coronavirus

has hurt the job market. 6.87 million people filed for unemployment insurance in the last week of March. Total claims since the outbreak began are 23 million claims.

• The data showed sharp dynamic impact of the virus to U.S. economy. The U.S. economy shed 701,000 jobs in the month to mid-March, which predates the worst to come.

• U.S. recession looms as the outbreak continues to grow in the United States. The extent of economic impact depends on how long the outbreak will last.

0

200,000

400,000

600,000

800,000

1,000,000

1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr

0.0

2.0

4.0

6.0

8.0

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Millio

ns 6.87 Million

COVID-19 drastically hit U.S. labor market

U.S. outbreak trajectory is still on the rise


Cumulative cases

people (thousand)

1.0

1.2

1.4

1.6

7.0

7.5

8.0

8.5

9.0

Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20

employment changeunemployment rate

0.0

0.5

1.0

1.5

2.0

EU France Germany UK Spain Italy

2019Q12019Q22019Q32019Q4

European economies slowed down even before virus hit European economic activities dropped in March

• Even before the virus, major European countries growth slowdown in the forth quarter of 2019. The impact from Covid-19 should push many countries toward recessions.

• EU lowest unemployment rate in decade should no longer hold for the coming months as virus induced closures.

• Following the situation in China, economic activities dropped in March for many European countries that induced country-wide lockdown. Manufacturing and service PMIs contracted sharply.

25

35

45

55

Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

Manufacturing PMI Service PMI Composite PMI

%, unemp rate % YoY, emp change

Virus should affect unemployment rate in the future

COVID-19 accelerates European countries’ recession risks


%YoY, GDP Index

0

20

40

60

80

100

25-Jan 1-Feb 8-Feb 15-Feb 22-Feb 29-Feb 7-Mar 14-Mar 21-Mar 28-Mar

• China’s economy activities sharply dropped during the lockdown in February. Investment, consumption, and production dropped lowest in 30 years.

• Work almost resumed to normal in March. Early indicators showed expansions in productions of businesses.

• As the outbreak expanded globally, China’s manufacturing and exports are subject to supply chain disruption. We expect China’s economy in 1Q to contract for the first time since it opened the country.

-30-20-10

010203040

2008 2010 2012 2014 2016 2018 2020

Fixed Asset InvestmentRetail SalesIndustrial Production

%YoY

Work resumed after lockdown to almost full capacity%

The economy was affected across all channels Early economic data displayed quick returns of activities

25

30

35

40

45

50

55

Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

Manufacturing PMI Service PMI Composite PMI

Sharp recovery in industrial activities as work almost resume to normal in China


Index

-16

-12

-8

-4

0

4


manufacturing services composite

Japan service sector activities slumped most in a decade Retail sales showed recovery from VAT hike last year

• Japan service sector activities slumped in March with PMI at 33.8 which was the lowest drop in the decade. This data showed impacted of social distancing in Japan to its service sector.

• Industrial production remained lowed with contraction of 2.5% from last year, continuing a downward trend.

• As for the effect from tax hike, retail sales saw the first positive growth since October at 1.7%

MoM, deviations from 50, + expansion - contraction

Trade and industrial production remained low

-9.0

-4.0

1.0

6.0

May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20

Trade IndexIndustrial Production Index

-10

-5

0

5

10

Feb-

17

May-

17

Aug-

17

Nov-

17

Feb-

18

May-

18

Aug-

18

Nov-

18

Feb-

19

May-

19

Aug-

19

Nov-

19

Feb-

20

YoY%

YoY%

Service activities in Japan dropped sharply in March


10

Contribution

Note : Forecasted as of 9 April l2020

GovernmentInvestment

Other serviceexports

Source: NESDB and TMB Analytics

GovernmentConsumption

PrivateConsumption

-0.6

Tourismrevenue

-5.1%(‘19=2.4%)

4.52.8 1.4 0.2

-3.6-5.5

2.0

-3.9

0.0

-3.9

-24.9

5.5

-14.6

-22.4

-58.4

-9.2

-33.0

’20 growth

ImportGoods

ExportGoods

PrivateConsumption

PrivateInvestment

GovernmentConsumption

GovernmentInvestment

Tourismrevenue

ImportGoods

ExportGoodsGDP share (50%) (18%) (15%) (6%) (13%)(52%)(54%)

PrivateInvestment

-1.3 0.4 -0.50.1 -1.72.8-2.1

GDP 2020F (Apr 2020): Contribution breakdown

GDP 2020F

Residual

-3.3

Other serviceexports

Total import services

(4%) (12%)

(share 4%)Total import services

1.1

(**GDP constant Price 2002**)

-17.2.%in USD

-24.7.%in USD

’19 growth

7.3

0

50

100

150

200

Avg 2019 Jan-20 Feb-20

11Source: CEIC, TAT Intelligence Center and TMB Analytics Note: Suvarnabhumi, Don Mueang, Hai Yai, Phuket, Chiang Mai airports

0

1,000,000

2,000,000

3,000,000

4,000,000

Jan Feb Mar

2019 2020

-45.5%

-79%

Passengers through 5 main airports(represent 80% of total foreign tourists)

Total Foreign tourist inbound

▪ As of February 2020, the number of foreign tourists were 2.06 million persons, contracted 42.8% (YoY). The decline were in all tourist groups due to the coronavirus outbreak, particularly Chinese tourists which declined by 85% YoY.

▪ Tourism receipt stood at 103.7 billion baht, contracted 43.9% from the same period last year in line with the tourist numbers.

▪ In March 2020, the number of foreign tourists will contract even with a double degree, partly reflected by the passenger numbers in 5 main airports that declined by 79%yoy.

Tourism ReceiptsBillion baht

2.5

-42.8

-3.7

-84.9

12.2

-31.1

3.4

-3.2

6.1

-48.6

-3.9

-29.2

-100

-80

-60

-40

-20

0

20

Jan-20 Feb-20

Total China ASEAN Europe EastAsia Others

Person

2.06 million persons3.81 million persons

%yoy

+1.0 %

As of Feb 2020, the number of foreign tourists contracted by 42.8% (YoY)

Total 103.7(-43.9 %yoy)

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2019 2020 Previous Forecast

Tourists Q1E Q2F Q3F Q4F 2020F

Person 6.56 0.21 2.56 6.70 16.0

%yoy -39.2 -97.6 -73.6 -34.3 -59.6

Person

TMB analytics forecasted the 2020 inbound tourist at 16 million persons, -59.6%

Source: TMB Analytics

16 million in 2020

Forecast Inbound Foreign Tourists (Thailand) 2020

12

39.8 million in 2019

18 million in 2020

13Source: MOC and TMB Analytics

Top 10 Export by Sector

▪ In January-February 2020, Merchandise exports contracted by 0.8%▪ Exports to most markets expanded but the exports to Japan and USA

contracted▪ Exports to USA decrease because of decreasing defenses export▪ TMBA expects export in goods contracted, due to adverse impacts of COVID-

19 outbreak, prolonged trade war and global economic slowdown.

Export by Country

-6.6

-1.5

-6.3

-3.8

11.8

-9.6

1.1

-7.0

2.5

1.4

4.0

-15 -10 -5 0 5 10 15

EU15

JAPAN

CLMV

CHINA

USA

ASEAN5

Jan-Feb 2020 2019

Total Export Growth

-0.8%Jan-Feb 2020

-2.5%2019

In the first two months of 2020, export contracted by 0.8%

-17.3

-10.9

-21.2

-7.6

-8.3

2.0

6.1

0.0

-7.2

-6.0

-14.1

2.6

3.1

-1.8

-11.1

9.7

-3.0

0.3

2.2

2.0

-30 -20 -10 0 10 20

Chemical (3%)

Machinery Trader (3%)

Energy Producer (3%)

Construction Material (4%)

Plastic (5%)

Rubber Product (5%)

Foods (8%)

Home Appliance (10%)

Electronic/Computer & Parts (14%)

Vehicle (15%)

Jan-Feb 2020 2019

%yoy growth in USD %yoy growth in USD

Source: MOC and TMB Analytics

▪ TMBA expects export growth in 2020 shrink -17.2% due to COVID-19 pandemic and global economic slowdown.▪ Export growth will shrink mainly in Q2-Q3, and it will slightly recover in Q4.▪ Vehicle may highly decrease because of temporary factory shutdown and low purchasing power.▪ Food still increase because it still have demand from consumers.

Export Growth Forecast by Top 5 Export Volume in 2020

-9.1 -5.7

-20.0

5.2

-10.3-17.9

-32.0 -28.2

-79.7

5.4

-29.7 -25.0-19.8-14.0

-52.0

8.1

-19.7 -15.1-7.9 -3.5

-28.4

10.0

-4.8 -7.3

Total Export*

-20.5%2020F H1

-14.0%2020F H2

Total 2020F

-17.2% Total Electronic/Computer & Parts

(19%)

Foods(9%)

Vehicle(13%)

Electronic/Electric Home Appliance

(7%)

Chemical(7%)

Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F

Q1F Q2F Q3F Q4FQ1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F

In 2020, export growth will shrink mainly in Q2-Q3, it will recover in Q4

14

%yoy growth in USD

15Source: Office of Agricultural Economics, UTCC and TMB Analytics

Non-Agri Employment

%YoY

2.40%

-2.7%

-8.7%

-12.1%-15%

-10%

-5%

0%

5%

10%

Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

PCI Non-durableSemi-durable Durable

Private Consumption

%YoY

3.7%

-20%

-10%

0%

10%

20%

Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20

Price Quantity Farm Income

%YoY Farm income

PCI = 3.4%yoy

▪ Private consumption index was at 3.4% yoy, mainly due to the growth in non-durable goods. However, other consumption categories expressed sharp contractions due to the adverse impact of global pandemic.

▪ For the consumption-supporting factors, total employment still in contraction, both in agriculture and non-agricultural sectors. Farm income grew due to the price impact after the drought but production quantity declined. Consumer confidence showed further negative concerns over economic condition and outlook

60

70

80

90

100

Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20

Consumer confidence

Overall Consumption got adverse impacts from pandemic and weak supporting factors

-0.6% -0.3%

-8.0%

-3.5%-4.4% -4.4%

-10.0%

-5.0%

0.0%

Trade ManufacturingServices Hotel&RestaurantTransport&Communication Construction

Feb-20

Feb-20

-12.1%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20

Transportation VAT hotel restaurantNon-residents Service

Feb 20

-8.7%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%


Commercial car Passenger car Motorcycle Durable

Durable consumption%YoY

Services consumption%YoY

Feb 20

Durable and Services Consumption Contracted by 8.7% and 12.1% respectively

Source: CEIC

Services consumption declined in line with tourism sector.Durable consumption contracted, especially passenger and commercial cars.

16

-2.7%

-20%

-10%

0%

10%

20%

30%

40%

50%


Sales_semi_dur Import_textile Semi_dur

Feb 20

2.4%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%


Oil Index HH Electricity Non_dur

Non-Durable consumption% YoY

Semi-Durable consumption%YoY

Feb 20

Source: CEIC 17

Non-Durable grew due to electricity and oil consumption, while semi-durable contracted Consumption Contracted by 8.7% and 12.1% respectively

18

% contribution

Headline inflation -0.54

Non-core -1.74

Core 1.58

Source: CEIC

Headline inflation decelerated due to the declined transportation cost.

0.27

0.73

1.24 1.23 1.150.87 0.98

0.520.32

0.11 0.21

0.871.05

0.74

-0.54

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

CPI: Food & Non Alcoholic Beverages (FB) CPI: Apparel & Footwears (AF)CPI: Housing & Furnishing (HF) CPI: Medical & Personal Care (MP)CPI: Transport & Communication (TC) CPI: Recreation, Reading, Education and Religion (RR)Consumer Price Index (RHS)

-10.1

-15

-10

-5

0

5

10

Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

PII BSI-50

Private Investment and BSI

-20

-10

0

10

20


Construction Area Permitted Material Sales Index

Constructions

-30

-20

-10

0

10

20

30


Imports of Capital Goods at 2010pDomestic Machinery Sales at 2010pNewly Registered Motor Vehicles

Domestic investment indicators%YoY %YoY

%YoY

▪ As of January 2020, private investment contracted 10.1% from the same period last year. This was due to the sharp decline in imported capital goods. Meanwhile, other indicators particularly that of constructions showed negative signal.

▪ Business sentiment was in a consecutive declining trend over times.

Feb 20 Feb 20

Feb 20

Source: CEIC

Private investment contracted 10.1% from the same period last year

19

Source: MOC and TMB Analytics

Top 5 Import by Sector

Total Import Growth

-6.3%Jan-Feb 2020

-4.9%2019

Private Investment Plunged in Tandem with sharp Import Contraction

Imports contracted signaling the slowdown in production and investment

▪ Imports contracted by 6.3%YoY mainly in energy transportation equipment, together with the continuing decrease in business sentiment thus signal the forthcoming slowdown in private investment and production in Thai economy.

▪ TMBA expects the momentum of private investment will slower as global economic slowdown

▪ In Q12020, import value may decrease, especially in energy product because of lower price of energy and decreasing demand of energy consumption. Moreover, other goods may decrease because of temporary factory shutdown and decrease demand of consumption

-10.1

-15

-10

-5

0

5

10


PII BSI-50

20

1.2

3.5

-10.9

-4.0

-7.6

-10.6

2.3

3.7

-0.8

-8.1

-15 -10 -5 0 5

Transportation Equipment (6%)

Consumer Goods (12%)*

Energy Product (17%)*

Capital Goods (25%)*

Raw Material & IntermediateGoods (27%)*

Jan-Feb 2020 2019

*share of import

%yoy growth in USD

%yoy growth

Source: FPO, SEPO and TMB Analytics* Disbursement rate for FY2012 dropped to 66% due to budget delay for 5 month

Expect Smaller Public Investment Even Unlock 2020 Budget

6.4%

66%70%

0

20

40

60

80

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

FY2020FY2012*FY2019

73%

16%

0

20

40

60

80

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

FY2019FY2020

21

▪ For 5MFY2020, public spending still hit by budget delay, particularly investment budget. Central government injected only 6.4% of total investment while state-owned enterprises disbursed 16% of total budget, 372 bn BT.

▪ We expect the boost from public investment this year would be smaller as the government is likely to cut around 10-20%of budget to support covid-19 rescue package.

% disbursement % disbursement

Central Government Investment SOE Investment

Source: : www.Thaigov.go.th and TMB Analytics

• Soft Loan by GSB, SME

Bank, KTB ( 123 bn Bt)

• Soft Loan by GSB , CB

( 150 bn Bt.)

• Credit line by SSF (30bnBt)

• Suspending principal,

reducing interest rate by

GSB, GHB

• Easing rules of CB loans by

BOT

22

Need More Alleviate Package to Survive During Lockdown ▪ The first two packages worth 400 bnBt (2.5% 0f GDP) target to compensate income for employees and also increase

liquidity for businesses.▪ Only 45bnBt to directly support target group who aren’t in the social security system.▪ Loan program measures focus to assist SMEs to survive while tax measures enhance to reduce expenses and keep

workers

• A Monthly

grant of 5,000

Bt/person for 3

months

(45bn BT)

Salaries Employees & Self-Employed Workers

• Emergency loan by GSB, BAAC

(40 bnBt.)• Special secured loan by GSB

( 20 bn Bt)

• Low interest loan by GSB pass

through the Government Pawnshop

(2 bn Bt)

Businesses, especially SMEs

• Reduction withholding tilax

from 3% to 1.5%

• 1.5 times deduction for

interest expense

• 3 times deduction for wage

expense

• VAT refunds within 15 days

• Refund the deposit for

electricity usage

• Reducing contribution to

SSF from 5% to 4%

Loans Tax Measure and OthersLoansCash Handout

Source: : www.Thaigov.go.th and TMB Analytics 23

Phase 3 Package worth 1.9 trn Bt to Ease Covid Impact

•Soft loans to support liquidity for

SMEs (new loan)

•Pause payments of both principal

and interest for 6 months

Health system and

Relief Measures

600 bn

BOT Soft Loan Providing

:500 bn

BOT Market liquidity Enhancement :400 bn

Economic Stimulus

400 bn

Government Borrowing

:1,000 bn

•A Monthly cash handout

5,000Bt extend to 6

months

•Farmer relief supporting

•Public health protection

related to Covid-19

•Strengthen local

economy

•Support

infrastructure

investment in rural

areas

SMEs Relief Measures

500 bnCorporate Bond Market

•Establish the Corporate Bond Stabilization Fund

▪ Latest Covid-19 relief package aim to increase more liquidity for individual and businesses including financial institutions.

▪ Sources of the funding is acquired under three executive decree and budget reallocation.▪ New borrowing will surge public debt from currently 41% to 50% of GDP but remain below the cap of 60% under the

fiscal sustainability framework.Phase 3 Larger Relief Package

Source: Enlite and TMB Analytics

Consumer Goods

▪ Home delivery model: Food Panda, Grab Food etc.

Company Reaction

38

76

84

98

121

169

Beverages

Food

Electricity

Packaging

Consumer Goods

Healthcare

Operating Cycle (days)

Note: Operating Cycle (days) = AR + Inventory, suppose that businesses have enough working capital for a operating cycle

Services

Company Reaction

▪ Air transportation cancel fights due to virus

▪ Emergency decree impose ban some service businesses :

department store, entrainment, massage & spa etc.

23

41

48

68

123

Hospitality Business

Consumer Services

Transportation &Logistics

Business Services

Commercial Rental


Liquidity shock within 2 months (Mar – Apr)

Industry Goods

▪ Auto-makers (Ford, Mazda, Honda, Mitsubishi, Toyota) closed

production line until Apr 30

Company Reaction

71

92

98

109

113

113

115

118

121

131

137

Energy

Mining

Steel & Metal

Vehicle & Parts

Furniture Products

Machinery

Chemical

Electronic & Parts

Construction Material

Electric Home Appliance

Fashion Products


Liquidity shock within 4 months (Mar– Jun)Survive every operating cycle

24

COVID-19 impacts on Industries : Stable Industries VS Loss Industries

Demand for Necessary Goods

Low ImpactStable Industries

High ImpactMedium Impact

Loss Industries

COVID-19 Disease OutbreakEmergency Decree

Domestic Demand + Export Slowdown

Consumer Goods

Demand for Necessary Goods

Services

61,107

42,099

95,387

158,319

450,123

892,045

522,144

23,475

46,505

23,964

39,560

401,775

961,844

1,830,306

Packaging

Beverages

Electricity

Healthcare

Food

Wholesaler

Retailer

Micro/SM/L

Total Number of Labors = 5,548,653

34,890

66,187

393,172

630,464

285,217

61,916

514,657

265,374

500,580

1,163,348

Commercial Rental

Consumer Services

Transportation &Logistics

Business Services

Hospitality Business

Micro/SM/L


Low ImpactStable Industries

Source: Office of Small and Medium Enterprise Promotion and TMB Analytics

COVID-19 impacts on Labors : Stable Industries VS Loss Industries

Industry Goods

29,38419,514

44,182

123,530

114,453

209,481251,743

184,438

240,258

205,375

221,879

347,672

3,371

19,326

61,617

21,467

59,876

21,894

30,709

119,754

201,850

333,294

468,377

658,634

Energy

Mining

Furniture Products

Electric Home Appliance

Chemical

Electronic & Parts

Vehicle & Parts

Machinery

Steel & Metal

Fashion Products

Auto dealer

Construction/CONMAT

Micro/S

M/L


High ImpactMedium Impact

Loss Industries

COVID-19 Disease OutbreakEmergency Decree

Domestic Demand + Export Slowdown

25

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fed fund rate(lower bound) : 0%

Fed policy rate return to historic low

▪ Within two weeks of March, FED slashed the policy rate down in total of 150 bps down to 0-0.25% after considering hard-hit impacts that the Coronavirus may have to the economy

▪ FED increased its balance sheets to $6.13 trillion and more with pledge to $700 billion QE this year

▪ Reintroducing liquidity facilities Fed once used during global crisis to supply liquidity to markets and households, up to 2.3 Trillion dollars

Various monetary policy tools used by the Fed

Repurchase Operation (Repo) Funding additional $500 billion daily operation

Discount WindowLowering Discount rate by 125 basis points to 0.25% and extending term of loans to 90 days

Reserve Requirement ratio (RRR) Cutting reserve requirements for thousands of banks to zero

Emergency Liquidity facilities

Issuing emergency facilities such as MMLF, CPFF, TARF targeting all types of lenders

Swap line Reduction cost of the standing U.S. dollar liquidity swap line arrangement by 25 bpsExplosion of growing Fed’s balance sheet

Federal Reserves “Whatever it takes” plan to support the economy

27Sources: CEIC, FRED, TMB Analytics

%

Tn USD

2.53.03.54.04.55.05.56.06.5

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

▪ Concerns over economic impacts from Covid-19 and Oil price caused massive bond sellout, especially in lower grade bonds, which have higher chances of defaulting. Massive measure have helped slowing down selloffs

▪ Liquidity issues in bond market was one of the main factors prompting Fed to have a major rate cut. Market concerns over virus caused world massive bond-fund, including ETF, outflows above $250 Billion, a smashing record.

Credit spreads widened and calmed down slightly Massive outflows from Mutual funds across the world

0

100

200

300

400

2015 2016 2017 2018 2019 2020

U.S. investment-grade corporate bond spreads

Bond market is the place to look for cues of another financial crisis

28

UST yield spread widened sharply as well

-60-30

0306090

120

Apr-19 Jul-19 Oct-19 Jan-20 Apr-20

Inverted yield curve

10y-3m

10y-2y

-265,261-300,000

-200,000

-100,000

0

100,000

Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

Sources: CEIC, ICI, Bloomberg, TMB Analytics

bps

bps

Mn USD

MPC held emergency meeting, cutting rate to historical low at 0.75%

▪ MPC held an emergency meeting, a rare event, in which it decided to cut rate to 0.75%, lowest in history, following the path of other countries which cut rate in response to Covid-19

▪ TMBA view that there should be one more 25 bps cut in the second quarter, which will make the rate reaches 0.50%. The cut below 0.50% is now deem possible due to FDIF fee adjustment to 0.23%

▪ BOT intervened through massive buying of Thai government bond. Only the first quarter of 2020, BOT bought more than 140,000 million baht of government securities

29

0.0

1.0

2.0

3.0

4.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

-0.50.00.51.01.52.02.53.0

Malaysia

Canada

United States

Thailand

Australia

South Korea

England

Japan

European Union

CurrentChange

Global Policy rate cut in response to Coronavirus

62,936

109,630 144,739

74,231

143,023

-

50,000

100,000

150,000

200,000

2559 2560 2561 2562 2563*

Total Purchases of Government Securities by BOT (Million Baht)

* Data as of 24th March 2020

Thai policy rate reached new point at 0.75%

BOT intervened the Thai government bond market

Sources: CEIC, BOT, Bloomberg, TMB Analytics

% %

Mn Baht

Investors’ concerns caused massive net foreign outflows in March

▪ Thai government yield and spread were volatile in March from bond selloffs. MPC rate cut had minimal impact since market expectation already pricing in the cut.

▪ Net foreign outflows were massive in both stock and bond markets. Total outflows were 170 Billion Baht in sum. Outflows factored in the depreciation of Thai baht.

▪ Corporate bond yield spiked in March as well across all ratings30

Massive net foreign outflows in MarchThai government bond yield spread jumped in March

Sources: CEIC, TMB Analytics

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0

20

40

60

80

Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20

10y-2y spread10Y yield2Y yield

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

net foreign flows in bonds net foreign flows in stocks

Net foreign flows (Stock&Bond)

20.0

40.0

60.0

80.0

100.0

120.0


AAA AA A

Thai corporate yield spread spiked as well

Mn Baht

bps

bps %

THB depreciating sharply amidst Covid-19 outbreak

▪ Thai baht, along with other emerging currencies, reversed its course this year by becoming strongly depreciating during the widespread of Covid-19.

▪ Massive capital outflows and large drop in tourisms as well as dollar movements during economic crisis are all contributed to sharp depreciation of Thai Baht. TMBA views that the trend should continue for the rest of the year.

31

THB should continue its depreciating trend Best currencies came to worst from Covid-19 impact8.6%

3.8%1.3% 1.0% 1.0% 0.5%

-1.3%-3.5%

Thai Baht IndonesianRupiah

SingaporeDollar

MalaysianRinggit

JapaneseYen

Hong KongDollar

OffshoreChinese

Renminbi

SouthKorean

Won

Strongest currency in Asia in 2019

Weakest currency in Asia in 2020 (YTD)

-15.4%

-8.9%-6.0% -5.9% -4.2%

-1.5% -0.2%0.5%

IndonesianRupiah

Thai Baht SingaporeDollar

MalaysianRinggit

SouthKorean

Won

OffshoreChinese

Renminbi

JapaneseYen

Hong KongDollar

Data as of 07/04/20

30.0030.5031.0031.5032.0032.5033.0033.50

Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20

Depreciating trend :

32.00 – 33.50 (6-13%)

Sources: CEIC, Bloomberg, TMB Analytics

Baht/USD

Documents

Monthly Economics Insight...Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 2020 Previous Forecast Tourists Q1E Q2F Q3F Q4F 2020F Person 6.56 0.21 2.56 6.70 16.0 %yoy -39.2 -97.6