Economic Outlook Report 2021 Special Edition Clients and Industries, February 2021

Economic Outlook Report 2021 | Special Edition

Economic Outlook Report 2021 Special edition Clients and Industries, February 2021

1 Economic Outlook Report 2021 | Special Edition

COVID-19 Update 4 Global economy 6 Thailand economy 10

2 Economic Outlook Report 2021 | Special Edition

COVID-19 update

3 Economic Outlook Report 2021 | Special Edition

Coronavirus vaccine progress

Coronavirus Vaccine Tracker Leading vaccines

PHASE 1 PHASE 2 PHASE 3 AUTHORIED APPROVED ABANDONED 2020 2021 May June July Aug Sept Oct Nov Dec Jan Feb Mar April o Pfizer/BioNTech Trial 2 20 44k 2 -70°c 95% start Approvals Pfizer was the first company to report positive phase 3 clinical data. Vaccines Vaccines in Vaccines in Vaccines in Vaccines Vaccines It plans produce 50M doses in 2020 Results testing safety expanded large-scale early or limited approved for abandoned and 1.3B in 2021. and dosage safety trials efficacy tests use full use after trials Moderna Trial 30k 2 2-8°c 95% start Approvals Top Three Coronavirus Vaccine Compare Modern and Pfizer both use a new vaccine approach involving Price Efficacy Dose messenger RNA. Moderna expects Submitted to have 20M doses for the U.S. in for review (Per dose) December and 100M gllbally in Q1. $19.50* 95% 2 Trial 21 Days Apart AstraZeneca/Oxford paused Results Approvals $25-$37 95% 2 65k 2 2-8°c 70% AstraZeneva struck deals for 3 billion 28 Days Apart doses even before any late-stage Trial Trial study results. That’s more than twice start resumed $25-$37 70% 2 as many as any other candidate. 28Days Apart Initial clinical results were mixed. Early Remark: * $19.50 per dose for first 100 million doses approvals Sinovac Biotech Source: New York Times, BioSpace, Bloomberg 26k 2 2-8°c 50% Note: Information as of February 6, 2021 Sinovac’s vaccine triggers an immune responses using the Trial Results Covid-19 virus itself, after it has been start chemically inactivated.

*China took the unusual step of allowing vaccine distribution before conducting large-scale clinical trials.

4 Economic Outlook Report 2021 | Special Edition

Global Economy Overview 2021

5 Economic Outlook Report 2021 | Special Edition

Global economy remains prone to setbacks due to recent COVID-19 resurgence. Although, the IMF revised up 2020 growth, the recovery in 2021 is likely to be gradual, supported by vaccine progress and stimulus packages. With the exception of China, most key economies’ growth in 2021 should remain well below their pre-pandemic levels.

5.2 E in 8.2 i1 1.9 -8.3 0 2020F 2021F 2020F 2021F

2.3

pn -5.3 3.1 2020F 2021F

-4.3 2020F 2021F Source: IMF WEO Oct 2020 orl 8.8 6.2 Note: 1 Asia refers to Emerging and Developing Asia -10.3 -3.4 2 ASEAN refers to ASEAN-5 Indonesia, 2 Malaysia, Philippines, Thailand, 2020F 2021F ni E 2020F 2021F Vietnam

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Global Economic Outlook for 2021

Situation Monetary and fiscal policy • US economy was forecasted to contract by -3.6% in 2020. • Expect a new stimulus program in early 2021. • Unemployment rate has improved to 6.7% from 8.4% in August. • Expect Fed to maintain the current rate at least until 2024, with a slight chance of additional rate cuts. US • Despite the victory of Biden, if the Senate is dominated by the opposing party, problems will occur. • If the economic outlook worsens, Fed may expand the asset purchase by buying more long-term government bonds. • The Eurozone economy grew by 12.5% QOQ SA, representing a 3Q20 recovery • Expect more fiscal stimulus which will be funded by the Recovery plan of EUR 750 from lockdown easing. billion.

EU • Fiscal stimulus packages for 2021 will concentrate more on investment in • Expect ECB to maintain the current policy rate but may increase the envelope size infrastructure with financial aid and borrowing. for Pandemic Emergency Purchase Programme (PEPP). • ECB was expected to raise the PEPP ceiling by EUR 400-500 billion. • Japan’s economy expanded by 22.9% QOQ SAAR in 3Q20. • Expect BOJ to maintain the current policy rate and continue to ease its monetary policies. • The manufacturing output in September raised by 4%, mainly driven by exports of Japan industrial vehicles and capital goods. • The government retained Abenomics under the new Prime Minister but put more focus on economic restructuring. • A recovery in the service sector, defined by -8.9 percent YOY, has been decelerated. • The Chinese economy expanded by 4.9%YOY in 3Q20. • Maintains the current policy rate in response to the low inflation • As the economic recovery continues, China may slow down its further fiscal • Fiscal policy is likely to normalize in 2021 China stimulus measures.

Source: SCB EIC (Outlook 4Q 2020)

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Although Global PMI saw a fastest growth for over two years in October, it hit a speed bump at the end of 2020 amid resurgent waves of COVID-19 infections.

Global PMI and GDP

JPMorgan Global PMI by IHS Markit Global GDP annual % change • Global PMI edged down from 53.1 in November to 52.7 6% in December. 58 • The slower expansion during December occurred 4% 54 alongside renewed measures implemented to fight COVID-19 resurgence in many countries. 2% 50 • Nonetheless, the hit to global GDP from the pandemic in Q4 2020 looks considerably less severe than seen 0% 46 during the second quarter.

-2% 42

-4% 38

-6% 34

-8% 30

-10% 26 2006 2008 2010 2012 2014 2016 2018 2020

GDP PMI Output Index

Source: IHS Markit, JPMorgan as of January 27, 2021

8 Economic Outlook Report 2021 | Special Edition

Thailand Economy Overview 2021

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Despite an improvement in the final quarter, Thailand’s GDP in 2020 registered a contraction of 6.1%, the worst since the 7.6% decline in the 1998 Asian Financial Crisis. In 2021, SCB EIC anticipates a growth of 2.2% due to slower-than-expected recovery of foreign tourism, subdued export demand and the COVID-19 resurgence. Improving global growth, fiscal stimulus packages and vaccine progress will be keys to underpin recovery of the Thai economy.

8.8 2.2 5.7 2.7 2.7 3.3 0.8 1.2

-1.0 -1.5

-8.4

-13.3

-6.1 GDP growth -19.4 $ $

Private Private Public Public consumption investment consumption investment Exports Imports

2020 2021F

Source: NESDC and SCB EIC Forecast (as of January 27, 2021)

10 Economic Outlook Report 2021 | Special Edition

Tourism, a key driver of Thailand’s economic growth, has been one of the hardest-hit sectors by the crisis. Despite the Special Tourist Visa (STV) scheme and vaccination rollouts in many countries, foreign tourist arrivals are expected to reach 4 millions in 2021 and it could take at least 2-3 years to return to pre-pandemic level.

Foreign Tourist arrivals

Unit: Million persons, %YoY 39.8 40 20

35 0

30 -20 -40% 25 -40

20 -60 -83% 15 -80

10 -100 6.7 5 4.0 -120

0 -140 2017 2018 2019 2020F 2021F

Foreign tourists %YoY

Source: BOT and rungsri Research 11 Economic Outlook Report 2021 | Special Edition

Thai exports saw continual recovery after bottoming out during Q2 in 2020, especially products that benefited from the working-from-home policy, including computers and furniture as well as from the COVID-19 prevention products such as rubber. However, many sectors are still subject to contraction and downside risks.

Share and Growth of export value by product

Share 2020 Unit: % 11

10 Electrical appliances Agriculture 9 Auto parts

8 Agro Computer parts 7

6 Rubber products 5

3 Machinery parts Textile 2

1 Furniture and parts 0 -24 -22 -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14

YoY growth (2019-2020) Source: Ministry of Commerce, SCB EIC (Outlook Q42020)

12 Economic Outlook Report 2021 | Special Edition

Second Wave Subsidies: Government COVID-19 Relief and Stimulus Packages

Consumers Businesses

Cash handouts of 7,000 baht for 31.1 M 1 million additional nights of Tax Relief Measures people “We Travel Together” • Extended tax filing deadlines offering a 40% subsidy plus per diem • Reduced rates of taxes e.g. Land and Building • Reduced social security contributions

Reopening of 50-50 co-payment scheme • Reduction in household bills • BOT offers borrowers debt holiday for another 1 million people on Jan 20 • Reduce fees and boost internet speeds • Soft loans to businesses to support those WFH

Source: Bangkok Post as of January 13, 2021

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The Bank of Thailand kept its key interest rate steady for a sixth straight meeting and is expected to keep the rate at 0.5% throughout 2021. Fiscal measures and policy coordination among government agencies would be critical to support the economy going forward.

Policy rate % 3.5 Forecasted Why policy rate maintained low…

3.0 • Economic recovery remains highly uncertain with downside risks to growth

2.5 • Preserve the limited policy space to act at the appropriate and most effective timing

2.0 1.75 2021 Forecast

1.5 • BOT was expected to keep its policy rate at 0.5% throughout 2021 1.25 1.0 • BOT planned to cooperate with other public agencies to implement more specific measures to enhance monetary measure’s efficiency and support debt restructuring 0.5 0.50 0.50 process

0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: BOT, Bloomberg and SCB EIC (Outlook 4Q 2020)

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Thai baht should slightly appreciate from improving global economic conditions and less volatile trade tensions that should weaken the US dollar, thereby potentially bringing higher capital inflows into EM countries.

Exchange rate

Unit: THBUSD 37 Forecasted Key factors influencing the appreciation of the Thai baht 36 • Improving global economy e.g. Biden’s policy, vaccine rollouts Actual 35 Forecast • Capital inflows into emerging markets, including Thailand • Thailand’s current account surplus and relatively low 34 investment abroad by Thai investors

33 Implication 32 Negative impact to Positive impact to • Tourism sector • Import sector 31 30.5 • Export sector 30 29.5 29

28 Jan 16 Jan 17 Jan 18 Jan 19 Jan 20 Dec 20 Dec 21

Source: BOT and SCB EIC (Outlook 4Q 2020)

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Contributors

Narain Chutijirawong, Ph.D. Chananya Bunyalug Director Analyst Clients and Industries Clients and Industries [email protected] [email protected]

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