BOT Revised Upward the Country’s Real GDP Growth

Bank of Thailand (BOT) kept its policy rate unchanged at 1.5% since April 2015 MPC meeting. However, this was largely in line with market expectations. BOT noted that “ the current accommodative monetary policy stance remained conducive to the continuation of economic growth and should foster the return of headline inflation to target, although the process could take some time. Thus, the Committee decided to keep the policy rate unchanged at this meeting”. In the first eleven months of 2017, the countrys’s headline inflation averaged 0.7% yoy, as compared to 0.1% yoy in the corresponding periods of last year, lower than the official target of 1-4%. Nevertheless, BOT expects the policy to increase next year, albeit at a gradual pace, partly due to demand-pull inflationary pressure as well as US rate hikes. We believe the possible decision by BOT to raise policy rate next year is also on the back of better economic outlook. The central bank revised upward it’s annual GDP growth forecast for 2017 and 2018, from 3.8% during the September meeting to 3.9% in view of improvement in exports performance and higher tourism due to current global economic recovery. However, BOT guided in its statement that uncertainties in US economy, foreign trade policies and geopolitical risks will remain as downside risks to country’s economy and to be monitored closely in future. Separately, Indonesia’s exports slowed by 13.2% yoy in November (19.6% in October), but continued to sustain a double-digit growth for five straight months and better than market expectations of 12.6%. Growth in exports of non-oil and gas sector eased from 17.7% yoy in October to 13% in November, due to the sharp decline in agriculture sector, which fell further by 12.2% yoy in November, but offset by higher demand in manufacturing goods, which improved by 13.6% yoy in November. Exports in the oil and gas sector slowed from 40.2% yoy in October to 15.2% in November, attributed to lower demand for mining goods. In particular, exports of crude oil and gas eased by 9.1% and 14.7% respectively in November. However, in terms of exports by destination, exports of non oil and gas goods to its major trading partners, including China, US and India reported double-digit growth in November. Meanwhile, imports rose strongly by 19.6% yoy in November (23.8% yoy in October), exceeding market expectations of 13% surge. This was due mainly from high imports of non oil and gas goods, which grew by 18.1% yoy in November. This led the trade balance to narrow to 0.1 billion in November.

Source: Affin Hwang Research - 22 Dec 2017