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Bangkok, World Bank Thailand OfficeMarch 1999 14th Floor Tower A Country Director: J. Shivakumar

Diethelm Towers Comments to: U93/1 Wireless Road Stefan Koeberle, Lars SondergaardBangkok 10330, Thailand [email protected](662) 256-7792 [email protected]

Thailand Economic [lonitor: Executive Summary

Recent economic developments * Crucial bankruptcy legislation removes key obstacles forprogress in corporate restructuring. Markets reacted positively to

* The decline in manufacturing production has reached the the Senate passing critical bankruptcy and foreclosure legislationbottom, but there are still only faint signs of improvements. On a which on Friday, March 12. Because the Senate had amended theyear on year basis, several manufacturing sectors are now bills from their original form, the Lower House had to ratify theexpanding, particularly vehicles. However, the construction-related changes. On March 17, the House of Representatives passedsectors are still contracting, pulling down the overall picture in the anded On Th S ' n the Batcy actmanufacturing sector. The manufacturing production index (which amended versions. Tle Senate's changes to the Bankruptcy Actnow covers 60 percent of total manufacturing) contracted by 1 shorten the penod for which a person contmues to have bankruptpercent in January, compared with 2.6 percent in December. Even status from ten to three years, but kept the clause requiring personal

when the manufacturin secto startsgrowing,itwilltakeaguarantees to be considered binding. The Acts will now becomewhcrenae manoufactputbori sepacito stat gtowng , itmwill takena la law after royal approval. The Parliament has extended its current

increase in output before capacity utilizaton numbers, currently at session indefinitely to consider remaining economic reform bills.

The current session was scheduled to end March 22.

* Consumption is still stagnatinig. Thliere was no usual end of * Bank restructuring is slowly progressing butt NPLs are still onyear boom in retail sales despite the Asian Games in Bangkok, arid the rise, and new lending is scarce. With the June 1999 deadlinea record number of tourists visiting Thailand. Retail sales arid for stepped up (60 percent) loan loss provisioning rapidlyvehicles sates seem to have stabilized at a new low level but are approaching, the focus of Thai institutions has more than everstill contracting on a year on year basis. turned to recapitalization. Private banks remain reluctant to take

e Lackluster export performance impairs prospects fbr recovery. advantage of the August 14 recapitalization schemes--particularlyExports continue to disappoint, falling to $3,990 million in January, the Tier 1 scheme, that requires banks to recognize losses upfrontthe lowest level since January 1995. While the government's and write down capital, hence diluting ownership. So far, onlyrecovery plan hinges on a revival of domestic demand, rather than Siam Commercial Bank (SCB) has formally applied for the Tier Iexport recovery, there are rising fears that a downward adjustment scheme. Instead, Thai banks are resorting to complex financialin the 1999 export target would also imply lowering of the 1999 instruments to raise Tier I capital in the mar:ket while avoidingGDP growth forecast. Imports have been flat throughout 1998, participation in the government program.hovering around $3.3-3.4 billion, and are not picking up. * Outlook for 1999. Hopes of a speedy recovery are dim. ThePreliminary numbers for January indicate that imports decreased by path to recovery is still overshadowed by slow progress in4.4 percent in US dollar terms on a year-on-year basis, falling to restructuring corporate debt. a mounting portfolio of non-$3,174 million.

performing loans in the financial sector, and a regional market* Fiscal stimulus is hampered by implementation delays. Slow caught in recession. The economy appears to have bottomed out,disbursements and delays in external funding continue to constrain but it may stagnate at a low level for longer than initially expected.the anticipated fiscal expansion that is designed to jumpstart the Although the economy is starting from a iow base and theeconomy. The government plans to spend an additional Bt53 billion environment for growth will be more supportive in 1999, growth isto boost domestic spending and create jobs. The additional likely to remain flat.expenditures will be foreign financed, and are part of the measures Whether modest growth (or a small contraction) will hein the Sixth LOI (December 1, 1998) for a 5 percent public sector replaced by faster growth in the year 2000 and onward depends ondeficit in FY1998/99.rpae yfse rwhI h er20 n naddpnsothe pace at which investors and consuimiers regain coiifideiice,

* Consumer price inflation continued to fall from 3.5 percent corporate Thailand can restructure debt and present viable businessp.a. in January to 2.9 percent p.a. in February. Interest rates also projects to banks. Banks will only resume lending when they havecontinued their downward trend in February. The prime lending rate restructured themselves, written off bad loans, and recapitalized.declined by 1 percent to 10.3 percent while deposit rates fell by 0.5percent, narrowing the spread between the two. Money mark:etrates, already at a low level, continued to decline.

The views expressed in the Thailand Economic Monitor are entirely those of the authors and should not be cited without prior permission. They donot necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. The material contained herein hasbeen obtainedfrom sources believed reliable but is not necessarily complete and cannot be guaranteed.

Thailand Economic Monitor - 3 -

...but the economy is still tied down by massiveECONOMIC ACTIVITY over-capacity...

The manufacturing sector is improving... Capacity utilization remains low at 51.4percent in January. The collapse in demand has left

Manufacturing production contracted by I the manufacturing sector producing at only half of itspercent in January when compared with January total capacity for the past 13 months.1998. According to surveys conducted by the Bank ofThailand, 44 percent of the manufacturing sector ... leaving little room for a revival of privateexpanded on a year-on-year basis in January, 18 investment.percent of the sector contracted. The largestcontractions were in tobacco industries and The collapse in investment has greatlyconstruction-related industries. The year-on-year deepened the recession. Following years of rapiddecline in January was the smallest since July 1997 growth, private investment contracted by 15.5 percent(Table 2). in the first quarter of 1997 and has been on a

downward trend since. In the second quarter of 1998Contraction was larger than originally (most recent data), investment shrank by 41.1 percent

estimated. GDP appears to have contracted by 1.2 when compared with the already low figure from thepercent in 1997, a slightly higher contraction than the second quarter of 1997. Proxies for private investmentcurrent official estimate of -0.4 percent, according to suggest that the rate of decline of private investmentthe first quarterly GDP estimates relased by the is likely to have decelerated at the end of 1998.NESDB.' The quarterly GDP series also show that the However private consumption is expected to continueeconomy contracted by 8.4 percent in the first half of to decline by 2 percent in 1999 due to the low1998 when compared with the first half of 1997 capacity utilization numbers.(Figure 1). Since several proxies for privateconsumption and private investment continued toshow large declines in the second half of 1998, GDP Gross frKed investnent

probably contracted by more than the official estimate 50 --- Inmports of capital goods

of 8 percent irn 1998. There was a 10 percent decline 40 --- Domestic cement consumption30-in manufacturing production in 1998, which accounts

for 30 percent of GDP and is a good proxy for --

fluctuations in GDP. 0-10

Figure 1: Quarterly production indicators -30

~--40-15 - GDP -50-

-60 ---------- Manufacturing production O' O' CO

The water shortage threatens to undermine theperformance of the agricultural sector in 1999.

Cc5 The 1998/99 El-Nino related water shortage is

6 '.~ \ considered to be the most severe in half a century.-10 . \: Brought about by excessive water consumption, the

water shortage is likely to adversely affect the secondrice crop (harvested in March-April and according for

t't In In ~c £c r- r- oc o approximately 4-5 percent of the agricultural sector'stotal production) of the 1998/99 agricultural season. (

Table 5). Overconsumption of scarce groundwater is expected to result in land subsidence and soildegradation, and is expected to last for another 2-3months until the rainy season.


Figure 4: Quarterly consumption indicatorsWhile a poor second crop matters little fromi a Private consumption (1988 prices)

macroeconomic perspective (0.5 percent of GDE'), 60 e Real retail sales

half of the Thai work force are employed in the 40 -------- Sales of vehiclesagricultural sector and relies on earnings fromproducing primary products.

Figure 3: Origins of gross domestic product and -20employment (1996) -

50% -60E] Share of C;DP

45% -8

40% - Share of total enrloyrnnt -80 - -' ___< CY Y CYciC C0 Cy a 0

35%- 1 a C an- ca c

30%

25% |

21o5%; l iiX ,., [l ... while foreign investors cautiously returned to10% - 11 ii | tg lil l t l l g the debt-ridden real estate market in 1998.

0% ~~~~~~~~~~~~~~~Foreign direct investment and fioreign equity3 -° u t.5 ri ° 42 rUo uo flows into the real estate sector rose modestly in

5: X r < _ m Sot1998. Following a large decline in equity and FDIflows to the real estate sector in 1997, preliminarydata from BOT suggest that some foreign investorsreturned to the market in 1998 (Figure 5)3. Despite the

Private consumption remains depressed... BOT figures, few large transactions took place in1998 as a result of investors' concems over debts in

Domestic consumer indicators continue to the property projects they want to acquire.record large year-on-year contractions. The lar,geinflux of tourists and the Asian Games in Decemberdid not lead to much improvement to retail sales but Figure 5: Foreign direct investment and equitybeer sales surged. Real retail sales shrank by 7.2 flows to the real estate sectorpercent in December on a year-on-year basis,repeating last year's disappointing end of year sale.2 1,800 1 Foreign direct investmentPrivate consumption slowed down considerably in the 1,600 ED Equity flowfirst quarter of 1997 and has been contracting since, 1,400 -shrinking by 12.7 percent in the second quarter of , 1,2001998. When subtracting sales of vehicles, a category 1,000 lwhich has been contracting by more than 60 percent, Q 800the decline in private consumption has been more S 600 -moderate. 400 - F

200-

zcs n t T) 'D r- =~

Thailand Econtomic Monitor - 5 -

Depressed demand keeps prices low. Figure 7: Stock market index (end of month)

Consumner prices rose in February but the 700

annual inf7ation rate is stillfalling. Spending through 600-+

the Chinese New Year pushed prices up by 0.2percent compared with January. The annual consumer 500

price inflation fell to 2.9 percent. The annual inflationrate has been falling for eight consecutive monthsfrom 10.7 percent in June 1998. The annual wholesale S 300 -

price index fell by -7 percent in February, down from 2 -

-4.9 percent in January. Consumer prices have 200 X

adjusted slower to this sharp drop in 'true inflation', 100 -with the widening margins indicating that price _

decreases have not been fully passed on to consumers. ° . , 00 x a ov

Figure 6: Changes in prices

2 -- CPI - Wholesale prices EXTERNAL SECTOR

20 :~ - - .. .20

>l15 .The growth rate of export volumes is slowingx 10 . down...t: 10 -'''

Export volume growth continued todisappoint in December. Export volumes grew by

0 ° .' t - i e4- - 1 only 0.2 percent in December, underscoring thatvolume growth has effectively come to a halt (Figure

-5 8). Following months of double-digit growth, volume

lo0 growth came to a halt in August and grew by only 1.5> , 00 x oc Go percent in the last four months of 1998 compared with

t > z D D :4 = X <, D ^ the same period in 1997. Export prices shrank by 8.8a) < o n uu < < o n ;percent in December, causing exports in US dollar

terms to decline by 8.5 percent on a year on yearbasis. In US dollar terms, exports are declining across

Thai stocks increase slightly following the passing the board on a year on year basis (Figure 9) but inof the bankruptcy law and foreclosure legislation. volume terms, exports of high-tech manufacturing

goods and fishery products are expanding.The stock market remained unimpressed by

the passing of key reform bills and continued to hover Preliminary numbers for January indicate thataround the 350 mark. After an initial surge of in exports decreased by 9.4 percent in US dollar termsstocks on March 15 (to 360.88), investors locked in on a year-on-year basis to an estimated $3,990profits and the SET composite index closed at 354.95 million, the lowest level since January 1995.on March 16. Some investors are reported to remainon the sidelines, awaiting the release of the seventh For all of 1998, the country's exports in 1998letter of intent, and more details on the economic amounted to $52.9 billion, a drop of 6.8 percent. Thestimulus package. decline in US dollar terms was a result of a 13.8

percent drop in export prices which more than offsetthe export volume growth of 8.1 percent.


Figure 8: Changes in total exports Imports are flat at $3.3-$3.4 billion a nmonth...

6 Export unit value Export value25 --------- Export volun-& Imports have been flat since January 1998

(and negative year on year). Import decreased by 15.84 15 . ..- . percent, reflecting a 6.9 percent drop in prices and a

9.7 percent decline in volumes in December. Importstotaled $3.3 billion, slightly less than the averagemonthly level of imports at $3.4 billion since January

OC 1 T - 1998. The year on year declines are decreasing as a- ~5 V \ n _g result of the fact that imports are now being comparede -10 1 > V \ with months where imports had already collapsed to15 the current level. Preliminary numbers for January

-20 indicate that imports decreased by 4.4 percent in US> > > cc 00 co 00 0c co

dollar terms on a year-on-year basis.a 0 o a L. a a Dc

... with no signs of recovery.

Imports are stagnating. One possible leadingFigure 9: Changes in exports of manufacturing indicator for overall economic recovery is a rise in

goods imports. In particular, increases in capital goods (50percent of total imports) and raw nmaterials and

--- Labor intensive (I14% of total exports)High-tech (55%) intermediate goods (27 percent) are likely to reflect a

40 -. Resource based (9%) revival of investment while increases in imports of° --- Other mfg. goods (5%7)

30-- Other mfg, goods (5%) consumer goods could reflect a revival of domestic+ 20 <>. demand. Unfortunately, the level of all import10 lo-7commodities has been flat for months without any

;: O $ - T '' a signs of picking up. Once again, the year on year0 , A . graphs (Figure 11) give the impression that imports

U -20 -. .. are rising when the true story is that the level has beenflat for months. One exception is import.s of vehicles

8 40 0 di and parts (1.2 percent of total imports) whichexpanded by 43 percent in December, following 26

r- r> r- cc0 cc c xc cc cc months of large declines.a, 1 C:E cz c>\ c 7z 1_E 1: cE

< ° C *' < 0 ° :Imports in all of 1998 fell by 33.8 percent to$40.7 billion, reflecting a decline in import prices of8.8 percent and a decline in import volumes of 27.4

... casting doubt over the 1999 export target. percent. The terms of trade declined by 5.5 percent.Overall, imports have clearly bottomed out following

The slowdown in volume growth and the the collapse at the end of 1997 but there are no signscontinued decline in export prices have cast doubts on of recovery.the government's 4 percent export growth target (2percent in volume terms).4 According to the Ministryof Commerce, exports of agricultural products willdecline by 3 percent in 1999 while manufacturingproducts are expected to expand by almost 7 percentin dollar terms.


Figurie 10: Changes in total imports Figure 12: Current account to GDP ratio

A-& nportunitvalue - Importvalue 15----- -- Import volume

0

-50-15

20'

0 9

Z3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-5 -

- 35-

-45 - (0-92 93 94 95 96 97 9te 996

-50-r- N N cc oo r co x 0 X X

Cs C s Cs 0n C s Cs Cs

>- c a r; <:r4 = trl C a... but the capital account remains in deficit asbanks continue to repay debt.

Figure 11: C]hanges in imports (US$) by economic Net private capital outflows rose to $9.5classification billion in the second half of 1998, up from $6.1 billion

in the first half The capital account presents a mixed----- Consumer goods (12% of t(,tal imports) picture: there are large public capital inflows from the-- Intermediate goods & raw ,naterials (27%)--------- Capitalgoods (50%) rescue package, foreign direct Investment and

0 - Other imports (11%) portfolio flows, but even larger outflows from thebanking sector used to repay short-term debt, andacquire foreign assets. In 1998, foreign directinvestment totaled $6.9 billion, $2.1 billion of whichwas used to recapitalize the banking sector. Portfolio

-40 X V /investment totaled $0.5 billion, considerably lower- 50 than $4.5 billion recorded in 1997. However, these

-60 inflows were more than offset by $16 billion capital-70 outflows used primarily by the banking sector, and in-so - particular BIBF, to repay loans. Finally, the non-

N- c-. N 00 00 00 00 00Cr Css C s occ resident baht accounts recorded a net capital outflow< o> S O Q of $2.8 billion and other private capital movements

recorded an outflow of $4.2 billion. The large amountof capital outflows has led to a substantial decrease inshort-term debt (Figure 14).

The current account surplus for all of 1998 reachesa record high at $14,290 million...

Figure 13: Private and public capital flows

The trade surplus in January was the lowestsince April 1998, falling by one thirdfrom December. 6 * Pnvate

Following a large trade surplus of $1,230 million in 0 Public (incl. BOT) inflows

December, the surplus is estimated to have narrowedto $816 million in January as a result. A large influxof tourists in December resulted in a large surplus onthe service and transfer account. As a result, the -2 -

current account surplus rose to $1,450 million in 4 -

December. The trade balance in 1998 registered a 6 otw

surplus of $12,232 million while the current account ow

surplus rose to $14,290 million from a deficit of$3,100 millioni in 1997.


Figure 14: Long- and short term external debt Figure 15: Official reserves

l00,000 Long-term 100 Net forward obligationsShort-term --- Gross international res erves

90,000 --lotal debt (% GDP) 90 35 1 NNet international reserves

80,000 80 30

w 70,000 25 ----------'.-'- ...-

60,000-60 20 - 26-Febi99

50,000 5

40,000 40-

1 0,000- I o

0 CL CC CC CC CC CC m CC . c X C, CX

~~~~~~~~~~~~~~~~~~~~~~C E C) G E a ) C C0~~~~~~~~~C

Gross reserves are growing and offshore forwards ... but the buildup of reserves has taken place withand swaps have been unwound... borrowed money.

Gross reserves have been increasing steadily Balance of payments support under the S 17.2throughout 1998. On March 12, gross foreign reserves rescue package has been crucial to help build uptotaled $28.8 billion, equal to approximately 6,9 reserves. The large buildup of net reserves is onlymonths of imports of goods and services. Total partly a result of large current account surpluses.forward obligations were brought further down lto Equally important has been the balance of payments$4.9 billion on March 12 from $18 billion at the end support provided by the IMF, the World Bank andof 1997, and the remainder is reported to be onshore bilateral donors. As discussed, the large currentobligations. Net international reserves are estimated at account surpluses were partly offset by large capital$20.8 billion on March 5, 1999.6 outflows. Thus, the main reason why net reserves

were still increasing was because the Bank ofAre there enough internactional reserves to Thailand has been building up reserves with money

cover short term debt? At the onset of the crisis in borrowed under the financing package. While theJuly 1997, Thailand was extremely vulnerable to a BOT does not publish the amount of clisbursementreversal of capital flows, having access to only $1.2 under the financing package, increases in externalbillion in net international reserves ("usable debt owed by the BOT give an approximation.'reserves") compared with $42.9 billion external debtwith a maturity of less than one year. Currently, short- Figure 16: Estimate of amount of borrowedterm debt still exceeds net international reserves but reservesonly by $3 billion. The current account is expected to 20 Borrowedreserves (excl. IMF)record a surplus of $9 billion in 1999, the inflow of 18 F intedreservesforeign direct investment is expected to continue, and 16 - NetinternationalreservesBOT no longer has to use public inflows from thie 14rescue package to unwind forward/swap obligations 12 Csince all offshore obligations have been unwound. In , 10 -short, the threat of an unfunded financing gap has .o 8 -been mitigated in 1999. J 6

oC C C) C , C COcc z - c z


IMACROECONOMIC POLICIES The majority of the additional expenditureswill be used to create new jobs. The government plans

The governiment continues to face disbursement to use Bt26 billion of the Bt53 billion for job creationproblems. to ease the social strains caused by the economnic

crisis. Another Bt5.9 billion will be spent on

Expenditures declined by 11.2 percent in improving the quality of life for Thai communities. AJanuary on a year on year basis. The budgetary further Bt7.1 billion will be allocated to support thedisbursement. rate fell to 5 percent, compared with 5.5 construction of infrastructure while Bt3.1 billion willpercent in January 1998. The government is aiming to be used to increase the country's exportdisburse 89 percent of this year's budget but, as usual, competitiveness. Some Bt960 million will be used tothe majority of the expenditures will be spent in the encourage border trade and Bt6.7 billion will be usedlast quarter of the fiscal year. Last year's IMF deficit to boost management efficiency in the public sector.target was only reached by spending BtlOO billion inthe last month of the fiscal year, as the government Figure 17: Cumulative cash balance and IMFwas facing institutional constraints on spending targets(Figure 17). Unfortunately, it appears that thegovernment has not yet solved these problems, raising 4 Fiscalvear1997198 4F'sal 998/99

doubts as to whether the government will be able tojump start the economy by a fiscal stimulus. tIo.

The government recorded a su rplus on the 60- ibudgetary account but a higher deficit on the non-budgetary account, leading to a cash deficit of Bt2 -8billion. In January. revenues shrank by 16.6 percent '°°from January 1998 to Bt54 billion. Revenues have -120 -

been declining on a year-on-year basis throughout -140

most of 1998 as a result of dwindling tax revenuesfrom corporate taxes and import duties. Thecumulative dleficit at the end of January was Bt42.6billion, suggesting that the government is unlikely tomeet the IMF end-March target of Bt85 billion ... financed by Japanese and World Bank loans...(Figure 17).

The govemment decided to finance the... but the government is getting ready to spend an additional expenditures by foreign loans, thereby

additional Bt53 billion to stimulate the economy... avoiding a potentially protracted parliamentary debatethat is required for a budget amendment. Since

The plans laid out in the Sixth Letter of Intent December, the government has been waiting for theto stimulate the economny by spending an additional disbursement of World Bank (EFALII $600 million)Bt53 billion are finally materializing. In the Sixth and Japanese funds (OECF $250 million and JEXIMLOI, released on December 1, the government $600 million) to finance the additional expenditures.announced that it would widen the public sector's These loans have been delayed, pending the passingfiscal deficit from 3 to 5 percent by putting together of the bankruptcy and foreclosure bills. Thean additional fiscal stimulus package on top of the government plans to spend the majority of the Bt53regular budget. The Thai media are mistakenly billion in this fiscal year.reporting that the Bt53 billion is part of a newstimulus package. The announcement to spend Bt53billion is simply the result of the commitment laid outin the Sixth LOI, which finally seems ready to beimplemented.


... which will further raise public sector debt. Lending rates are now falling faster than depositrates...

Public debt has soared during the crisis.8

Total public debt rose from Bt753 billion (16.4 The commercial bank primne lending ratepercent of GDP) at the end of 1996 to Btl,889 billion (MLR) notched down one percent to 10.3 percent inby the end of 1998 (39.4 percent of GDP). By end- February while the deposit rate is now at 5 percent,1997 (when the baht was at 47.25 to the dollar) the compared with 5.5 percent in January."0 Highvaluation effect caused external debt to rise to an liquidity conditions in the money market led to aunprecedented proportion of total public sector debt. further decline in one-day and 1-month repurchaseThroughout 1998, public sector external debt has rates (Figure 19).risen as the central government has borrowed tofinance additional expenditures as revenues Figure 19: Money market ratescontracted, and BOT has received balance of (1-day and 1-month repurchase rates)payments support (Figure 16) as part of the IMF 25 -

rescue package. Central government domestic debthas also risen sharply since June 1998 as a. total of 20

Bt400 billion government bonds for FIDF has beenissued (Figure 18).

Public sector debt is likelv to rise further in1999. Public debt will increase in 1999 as a result of -BOT continuing to receive installments from the ------ -- I day R/P

rescue package. Moreover, the government has I tn RJP

estimated that the central government and state ownedenterprises will be borrowing approximately $3 O.-___. ... _

billion externally to finance expenditures in 1999.9 7 aa

The increase in public debt will require allocating C o a i 6°

future resources to service interest and repayment.NEDSB estimates that in FY2000, principal and ... causing the spread between deposit and lendinginterest cost will be around 2 percent of GDP. rates to narrow...

Figure 18: Public sector debtThe spread between lending and deposit rates

2,000 - 45 narrowed further in February. The spread between1,800 External debt (mnci. BOT) the minimum lending rate and a weighted deposit rate

Domnestic debt (CG and SOEs) 40lednwigtd .

1 ,60 T otal debt/GDP I has come down to 5.3 percent in February from 5.8percent in January and more than 7 percent in

1,400 - 2 gt 30 September and October. Banks have been reluctant to1,200- / narrow the gap between lending and deposit rates,

1,000 - since they have used the spread to cover the cost of800 $ / S 20 132 recapitalization rather than entering the government's

15 recapitalization scheme.400 10

200-

0

1991 1992 1993 1994 1995 1996 1997 Dec-

98


Figure 20: Lending and deposit rates and spread Figure 22: Commercial bank real private creditgrowth (incl. BIBF)

- Minimum lending rate

18 Weighted deposit rateTI_ Spread 20-16

14~~~~~~~~~~~~~~~~~~~~~~112- 0

10 - ........ 5.....

8 -- -- - - - - -

8 ~~~~~~~~~~~~~~~~~~06 _ -5

4 -10

2) -15N N -N N 00 00 00 00 00 00

_ -10~~~~~~~~~~~~~~~~~~~~~~so - 0 - C~ ' - C C 01~

C- r- rl- o - so t -

Figyure 21: Real lending rate" The baht weakened further in February.

8 The Thai baht depreciated slightly against the7 + dollar in February. The average exchange in February

6 depreciated by 1.1 percent from February to 37.0 to5 the US dollar, compared with 36.6 in January. On

March 17, the baht had weakened further to 37.33z,~~ 4 baht to the dollar (Figure 23). Real effective exchange

3i- rates in Thailand, Malaysia and Korea have2 appreciated since their lows in early 1998. The real

1 effective appreciation has been stronger in Thailand,o -X- i raising competitiveness concerns (Figure 24). The

r- r`- C-- oc oc X0 00 a0i 00 C,foreign exchange market was volatile in both JanuaryU ,!Q t = and February, reflected in more volatility of the~zl forward rates (Figure 25).

... but credit is still contracting at a high rate... Figure 23: Exchange rates0 -120

Despite falling lending rates commercial Noniinal -.---- Real

bank credit continued to contract in January. 10 100Commercial bank credit declined by 13.0 percent. .- , . .

This was mostly due to the decline in BIBF credits 20 . 80 °

which was caused by debt repayments, and the E..'continued reluctance to extend new lending. In 30 60gJanuary, the monetary base declined by 0.9 percent on 40 40a year on year basis. Narrow money (MI) expanded \by 0.6 percent when compared with January 1998. 50 - V 20

Broad money (M2) growth decelerated to 7.3 percent

in line with the slowdown in commercial bank 60° I I I I 0

deposits and commercial banks' credits to the private so ° Q * so

sector.


Figure 24: Real broad effective exchange rate PERCEPTIONS OF TIIAILANDindexes

Risk premium on Thai sovereign bontls has come110 - down.105

97.05 995° 7International investor's confidence in the

1l 90 \8\ . <, 92.8 region has increased. One measure of Thailand87.0 country risk is the interest differential that investors

< 80 place on holding a US dollar denominated75 - 71.8 government-backed bond. Thailand's US-dollar70 0 y S / : 7.8 sovereign bond due in 2007 was trading at more than

65- i 800 basis points above an equivalent US treasury in60 r - > x > o oO °s September of 1998 but has declined to around 250 in

CC C, C ' C' C' C March 1999 (Figure 26) and its volatility has also' 6 ° 2 T reduced substantially in recent months. On March 12,

A+ Japan .......- Korea i Malavsia Thailand's sovereign bond was trading at 243 basisPhilippines - Thaiand points above an equivalent US treasury.

Source: JPMorgan Figure 26: International spreads'

Figure 25: Volatility of forward rates 16007 THA

1400 CHNK2.5% 1 ID

- - KRW -.-- -CNY 1200

HKD -THB ..... 2 20 -- PHL / \ ,

2.0% I 1/

500 a SO D ; X X 29 12-Mar-99

1.5% -

5 / / - "~~~~ -/@''~~~'~~ '---- -- ~~400 ---------------

1.0% 400 , ' 200 .

0. 5 % xO . . C . . . . C C . . c c

0.0% - :-cc xC CC Ca a C c CC aaavc. ~c vSource: Bloomberg06 C' 5\ a CL a0 0 0 0 0 CCC Co L

.2 .C ;_2 .2 L L. E C. :o_ _ _ _ _ _ _ _ _ _ _ _ _ _

r l r - - rA -x- ~x SOCIAL IMPACT

Source: Clarion Securities AsiaPoverty is on the rise as a result of the economiccrisis...

According to the socioeconomic survey (SES)in 1998, the proportion of the poor i-ose to 13.0percent and 12.4 percent in the first and secondquarter of 1998, or equivalent to around 7.6-7.9million people, compared to 11.3 percent in 1996.Despite the reduction in employment and wages inurban areas, poverty is still largely a ruralphenomenon.


SES a'ata also show that the income gap is unemployed. However, as the pace of corporatewidening agtain. Second quarter data indicated that the restructuring begins to pick up (facilitated by antop 20 percent income group enjoyed a 55.8 percent amended bankruptcy law) there is likely to be moreshare of total income, a slight increase from 1996. layoffs and increases in unemployment in 1999. InThe 20 percent lowest income earners shared the same Korea corporate restructuring have moved faster thanportion of total income (4.4 percent) while the middle in Thailand but unemployment have been risingincome group enjoyed a smaller share of total accordingly to 8.5 percent in January 1999.income. 3

... as incomes have fallen and unemployment risen.CORPORATE SECTOR

Latest unemployment figures show that1,463,000 people were unemployed and 989,000 Corporate restructuring receives a boost by theunderemployed (working less than 20 hours a week), adoption of critical legislation...according to the November Labor Force Survey.Because of large seasonal fluctuations in the labor Progress is being made both in specificforce, it is difficult to interpret the new numbers from restructuring transactions, and in developing the legalthe first ever Labor Force Survey to be conducted in framework conducive to more rapid progress (seeNovember. When seasonally adjusted, unemployment Legal Reform Section).rose to 5.3 percent of the current laber force in thewet season of 1998 from 3.1 percent in t'ie dry season. The scope of the corporate debt problem is

becoming clearer since the Bank of ThailandFigure 27: Seasonally adjusted unemployment developed its monitoring capabilities. The NPL

rates"4 problem in Thailand can be divided into large,6 medium and small cases. At the large end of the

spectrum, there are roughly 300 large NPLs which5 exceed 500 million baht each, representing roughly

1/4th of the NPL problem. The average size in thisset exceeds 2 billion baht per case. The medium-sized

s: 3 - 31 set, with over 1,500 cases between 100 and 500;, 2 2 ~ / million baht per case, represents another 1/4th of total

tY -> /1.4 NPL. The smaller cases, under 100 million baht percase, represent roughly half of the NPL, and is spread

O over tens of thousands of corporate cases (Figure 28).on o~ a~ a~ a ~ cc ovv 8 o~

,, 1, ,,, >, ,,, >, ,, <,, >, <, Figure 28: Estimated Number of NPLs to be: z3 cl: W n > restructured by size of problem

Source: Kakwani and Pothong, 1998Large

The rnain reason for the large fluctuations in cases

the labor market is that the agricultural sector is still (>Bt500million,the main source of employment in Thailand (Figure Small approx.

3). Within the agricultural sector, employment varies (<BtlOO/ 300firms)

substantially between the wet and dry seasons. For million 3iexample, the agricultural sector employed 11.6 over

million people in the dry season in 1998 but 16.5 40,000 Medium

million people in the wet season (36.1% and 49.4% of firms) (BtlOO-500the total labor force, respectively). rnillion,

over 1,500

Despite the government's efforts to create firms)

new jobs, unemployment cani be expected to rise in1999. Part of the government's additional spendingwill be used to create jobs for at least 200,000


Progress in corporate debt restructuring was Inter-creditor arbitration. Out-of-courtslow in 1998, but has improved in the first quarter cf restructuring transactions currently require a1999. Through January 1999, roughly 187 billion unanimous approval, which is extremely difficult tobaht of debt had been restructured. The pace of debt obtain. The slow process of reaching consensusrestructuring seems to have finally exceeded the pace prompted the creditor community to explore theof NPL growth, and an important milestone - concept of intercreditor arbitration agreement. Alongrestructuring 10 percent of the total NPL pool - may with the Bank of Thailand, associations representingbe achieved before the end of April. By February Thai Banks, Finance Companies, and foreign banks1999, the pace of creditor approvals of restructuring have now signed up to a legally binding approach. Atplans improved, both quantitatively and qualitatively, a signing ceremony at the Bank of Thailand, onincluding the completion of 56 of the 200 cases March I9 th, 1999 the intercreditor and debtor-creditortargeted by the Bank of Thailand. The US$362 agreements were signed by 60 banks, including 31million (Btl4 billion) restructuring of Alphatec foreign banks. Because the agreements will putElectronics was Thailand's first approved formal pressure on lead creditors to maintain time limits, andreorganization plan under the 1998 reorganization enable mediation, they should result in a moreamendment. Srithai Superware, Fuel Pipeline streamlined, rapid process. Specific provisionsTransportation, and United Communications reached include:agreement with creditors. The first case represented alarge voluntary restructuring without a major strategic * adherence to the timetable expressed in theinvestment, the second a major workout in a project Framework for Corporate Debt Restructuring,finance context, and the last involved voluntary debt with clear rules for initiating a restructuringrestructuring with international bondholders. Several process;large cases are in the pipeline, including Thai Oil, a provision that restructuring plans would beTPI, and Telecom Asia - each over $1 billion. approved through a consensus vote of 75

percent by debt amount, 50 percent by- .while new measures to speed up proactive number of debtors;restructuring are being considered. * for cases below 1 billion baht in total assets,

an arbitration panel, consisting of experiencedWhile indications of increasing momenturm financial and/or restructuring members from

are evident, the scope of the problem merits more the Association of Finance Companies, Thaiproactive approaches. Bankers' Association, and Foreign Banks'

Association, to address cases where 75High-level mediation. The mediation rule can percent agreement could not be achieved; and

be very useful in accelerating the pace of corporate . available mediation for resolution of disputesrestructuring, particularly in cases where some or all between parties.of the participants are not familiar with corporaterestructuring dynamics and complexities. Rapid reprovisioning. The Bank of Thailand

and the Ministry of Finance are considering a revisionSME business support. Many medium sized of rules to enable more rapid reclassificati.on of NPLs

firm managers are unfamiliar with business to performing "pass" loans as soon as debtrestructuring techniques. The World Bank would restructuring agreements are signed. Currently, banksfund restructuring centers, which would help SMEs can only reclassify loans after three consecutiveemerge from the current crises with more sustainable payments are made.capital structures and improved strategic, operationaland financial management.


SEC/BOI changes. The SEC has amended and SPPs). Seven IPPs have contracted to generate asome notification requirements for companies total of 5,944 megawatts of electricity for EGAT,involved in a rehabilitation plan. The approval period largely using natural gas, with some of these on linewas reduced from 45 to 30 days, and some approval as early as 1999. Two of these IPPs are currentlycriteria were ]relaxed. For distressed enterprises, the under construction and should be on line within theSEC adopted a disclosure-based approach over a next two years.merit-based approach for its regulatory approval.Furthermore, the SEC issued a notification of The Master Plan, in accordance with policyconditions under which a purchaser of a company can developed by NEPO, calls for introduction of fullbe exempted from the requirement to make a formal competition in power generation (involving a powertender offer in the case of purchasing a company for pool structure) to complement existing independentrehabilitation. Nonetheless, significant legal and power producers, with open third party access toregulatory challenges remain. Several of these are wheeling services, as well as retail competition.related to the Companies Act, which does not allow Eventually, an independent system office, owning nouse of treasury stock. The Board of Investment is generation assets, will be established to overseesimilarly seeking to extend promotion privileges transmission. Over the medium term, the Electricitybeyond the initial period where such extensions can Generating Authority of Thailand (EGAT) will behelp in restructuring, and also to enable transfer of corporatized and restructured, with individual powerprivileges in a restructuring. plants and subsidiaries sold.

Water. The Master Plan proposed twostrategies for increasing private sector participation inBangkok's water utility, MWA, in order to improve

Currently, 65 state-owned enterprises operate service quality and reduce the city's unaccounted forin Thailand. In 1998, these enterprises had total water (40% of total production). Options include arevenues of 884.2 billion baht ($US 24 billion) and long-term concession or corporatization and sale ofemployed 336,648 people, just over 1 % of the labor shares to a strategic partner. For the Provincial Waterforce. Revenues of state enterprises accounted for a Authority, serving the remainder of Thailand, itsignificant portion of economic activity-- proposed dividing the authority into several separateapproximately 14% of 1997 GNP. State-owned regional water utilities, with private sectorenterprises operate primarily in four infrastructure participation initiated on a case by case basis. MWAsectors-energy, telecommunications, transportation and PWA currently serve as both policy maker andand water-as well as in banking, services and regulators for the water sector. In the future, withmanufacturing. Many of these activities are increased private participation, it is expected thatgenerally considered to be outside core govemment these authorities will shed their policy making andfunctions, and could be delivered through private service provision functions and be transformed intosector participation. regulatory bodies for the sector.

With the objectives of raising revenues and The World Bank, through a Japanese Projectimproving efficiency, the government is undertaking a and Human Resources Development Grant, isprogram of divestiture of state enterprises. On currently sponsoring an in depth study of options forSeptember 1, 1998, the Cabinet approved a Master private participation in the water sector in BangkokPlan for State Enterprise Reform. The Master Plan and the provinces. The study will also makelays out a comprehensive strategy and timetable for recommendations on tariff structures and will involveprivatization in infrastructure, as well as for various drafting of legislation to create a regulatory body toother state owned enterprises, ' oversee private operators. The study is currently

being contracted, and is expected to begin in August.Energy. The Electricity Generating Authority Transactions will follow pending the government's

of Thailand (KEGAT) is currently the main entity in acceptance of the study's recommendations.charge of electricity generation, transmission and saleof bulk energy to distributors in Thailand. Privatesector participation in the sector will be encouragedthrough independent and small power producers (IPPs


Transportation. Objectives for reform of this phased approach in which the government will firstsector-encompassing land, air and water partially liberalize the market for domestictransportation--are to reduce the role of the state and competitors, followed by full liberalization.enhance private sector participation. The Ministry of According to the Telecommunications Master Plan,Transportation and Communications is to bear the government intends to convert the concessions,primary responsibility for transportation policy. The after which revenue sharing agreements will beMaster Plan proposes that the provision cf waived, and operators, including CAT and TOT, willtransportation services will be predominantly the pay license fees to a newly established Nationalresponsibility of the private sector, with reforms Communications Commission (NCC). Compensationseparating regulatory functions frorn policy from concession conversions will be used to reduceresponsibilities exercised by line government service fees.agencies.

Draft Telecom and NCC Acts to regulate theHigh contingent liabilities in transportation, sector are currently being reviewed by the Juridical

particularly for the State Railways of Thailand, make Council and the Ministry of Transport andfinancial restructuring an urgent necessity. In 1997, Communications. These Acts will be presented toSRT recorded a loss of 1.76 billion baht (US$48 Parliament soon. The MOTC hopes to launch themillion), while receiving a government subsidy of 3.7 NCC this year.billion baht (US$ 100 million). Basic maintenance ofthe railways, and improvement of the safety record,are top priorities. The Master Plan has proposed forSRT a separation of infrastructure, operations and realestate assets, with private sector participation in o Crucial bankruptcy legislation removes keyoperations and real estate. obstacles for progress in corporate restructuring.

A study, sponsored by the World Bank In March, 1999, Parliament approved aEconomic Management Assistance Project under the landmark amendment to the Bankruptcy Act whichMinistry of Finance, is currently being contracted to included improved security for new lending to

prepare SRT for separation of accounts and private financially distressed corporates, voting by creditorprepare class, rescission of related party transfers, limits tosector participation. discretion for court action, and conversion of foreign

Telecommunications. Two state enterprises currency-denominated claims. In the compromiseprovide the bulk of telephone service in Thailand. with the Senate, the time period for a person to beThe Telephone Organization of Thailand (TOT) considered bankruptcy was established at three years.provides domestic telecommunications services, while Parliament also approved the creation of a specializedthe Communications Authority of Thailand (CAT) bankruptcy court, which is expected to open in Aprilprovides international services, as well as telex and 1999. The lack of a well-functioning process forpost. These enterprises have operational and exercising security rights has been a key obstacle toregulatory authority over telecommunications in their more rapid resolution of secured debt.respective areas, and are under the authority of theMinistry of Transport and Communications (MOTC). In March 1999, Parliament approvedWhile CAT and TOT compete in some areas such as amendments to the Code of Civil Procedure designedcellular, paging, etc., they largely operate in exclusive to expedite the process of claim, judgement, executionproduct markets. and collection in a foreclosure. Whereas debtors were

previously able to appeal judgements delay execution

In accordance with a commitment to the indefinitely, appeals are now limited to the court ofWorld Trade Organization to fully liberalize its first appeals, and discretionary power of judges totelecommunications market to foreign competition in rescind auction sales is limited. Parliament also2006, Thailand has begun to open the sector to private improved the simple case procedure in a manner thatcompetition. This strategy is put forth in the would expedite the enforcement of security interests.Telecommunications Master Plan, approved by theCabinet in November 1997. The strategy is for a


Corporatization Law. Significant progress Limited Issuance Preferred Stocks (SLIPS). TFB haswas made in February on the government's legislative issued Bt4O billion in preferred stocks andreform program. In order to facilitate privatization, subordinated debentures under the SLIPS scheme,the Government submitted a Corporatization Law to which makes the two instruments inseparable. TheParliament that prepares enterprises for privatization preferred shares (Bt2O billion) qualify as Tier 1by converting them to corporations. The Senate as capital; the subordinated debentures (Bt2O billion) asapproved the law with amendments requesting Tier 2 capital. Bangkok Bank (BBL) and Bank ofconsultations with employee representations of Ayudhya (BAY) have issued, or are in the process ofenterprises that are to be corporations. issuing, very similar instruments--called Capital

Augmented Preferred Shares (CAPS) in BBL's case.Parliamentary Timetable: These new capital instruments provide current bank

Amendments related to restructuring shareholders with a temporary solution to increaseHOUSE SENATE LAW Tier 1 capital while avoiding dilution of their

1st 2nd & 1st Senate House controlling interests. Market analysts, however, havereading 3rd reading Vote reconfirm expressed concerns as to what extent these

reading instruments bring fresh money to the banking systemBankruptcy Passed Passed Passed Passed Passed (as over half of the buyers are depositors of the

Court issuing bank or other Thai banks). The issues haveAmendments Passed Passed Passed Passed Passed been very successful among investors as the

to 1/23 3/1 2 3/17 SLIPS/CAPS pay a relatively high rate of return (forBankruptcy TFB, 11 to 23 percent depending on the bank's

loaw profitability, against 4-5 percent on bank deposits).Foreclosure: Passed Passed Passed Pa-,sed Passed

Petty Cases 1/20 3/12 3/17 As for the government-sponsored August 14Foreclosure: Passed Passed Passed Passed Passedexecution of 2/10 3/12 3/17 scheme, only SCB has formally applied for Tier 1

_udgement capital injections from the government, with matchingForeclosure: On funds coming from existing shareholders. SCB has

Summons agenda also announced its intention to participate in the Tierprocedures 2 scheme, which links government Tier 2 capital

injections to progress with corporate debtrestructuring.

FINANCIAL SECTORMeanwhile, the five state-owned commercial

banks--Krung Thai Bank (KTB), BankThai (BTH),With the June 1999 deadline for stepped up Siam City Bank (SCIB), Bangkok Metropolitan Bank

loan loss provisioning (60 percent) rapidly (BMB), and Radanasin Bank (RAB)--are in theapproaching, the focus of Thai institutions has more proces of rai sin Bal frABh-garenthe

process of raising capital from the government. KTBthan ever turned to recapitalization. Private banks is undergoing a major restructuring following theremain reluctant to take advantage of the August 14 isunergoing a major retrutrng fli themerger with First Bangykok City Bank, and the transferrecapitalization schemes--particularly the Tier 1 of the performing assets of Bangkok Bank ofscheme, that requires banks to recognize losses Commerce. BTH is also being restructured followingupfront and write down capital, hence diluting the merger of Krung Thai Thanakit with Union Bankownership. So far, only Siam Commercial Bank of Bangkok and with twelve intervened finance(SCB) has formally applied for the Tier 1 scheme. companies. Both institutions plan to sell part of theirInstead, Thai banks are resorting to complex financial govemnment stakh by next year. SCIB, BMB andinstruments to raise Tier 1 capital in the market while RAB have recently increased capital through debt-to-avoiding participation in the government program. equity swaps from FIDF, the privatization advisors

Bank restructuring is slowly progressing... have been hired, and the sale process will soon beunderway. The BOT has recently agreed on a loanloss sharing mechanism that will apply to strategic

Thai Farmers Bank (TFB) led other banks in investors interested in buying these three institutions.raising capital this year through the issuance of aninnovative Tier 1 capital instrument known as Stapled


... but NPLs are still on the rise, and new lending is government-guaranteed paper will carry a premium ofscarce about 300 bps over government and government-

With little signs of recovery, and continued guaranteed securities.delays in corporate restructuring, non-performingloans (NPLs) continued to grow through end-1998.According to the latest figures released by BOT,NPLs at Thai commercial banks (including those AssESSMENTintervened) accounted for more than 49 percent oftotal loans (or Bt2.3 trillion) as of December 1998--in The economy appears to have bottomed out...average 42 percent in the eight private banks, and 62percent in intervened banks and KTB. Foreign banks Several signs indicate that the bottom of thehad NPLs of close to 10 percent. crisis may have been reached. First, production.,

consumption and investment indicators have leveledReal credit to the productive sectors has out at a stable low level equilibrium that does not

continued to decline in recent months, despite a high seem to be deteriorating further. Second. Thailand'slevel of liquidity in the financial system. There is a vulnerability to external shocks has been reducedheated debate on the relative weight of demand and considerably by increasing reserves (both gross andsupply constraints behind this phenomenon. On the net), paying off short-term debt, and turning a largedemand side, new credit applications are said to be current account deficit into a solid surplus. Third, inlimited due to the economic slowdown, existing contrast to a year ago, both monietar-y and fiscal policyovercapacity, and cash flow still available to are now accommodating of growth. Interest rates havedefaulting firms from non-repayment of loans. On the fallen to pre-crisis levels without threatening thesupply side, higher risk aversion by banks, as well as stability of the baht or raising inflation, suggestingprovisioning needs for all loans in face of capital that monetary policy can be even more expansionary.adequacy pressures, are both constraining real credit Fiscal policy has also been geared to stirrulate thegrowth. economy by allowing the deficit to grow to 5 percent

of GDP in the current fiscal year-- or 8 percent ofGDP when including the interest cost of financial

The FRA will hold its next auction on sector restructuring.March 19, 1999. The FRA will accept bids for thesecond round auction of business loans this Friday. There are also small signs of recovery.The sale includes Bt229 billion (US$6 billion) in Within manufacturing, the vehicles and parts sector isbusiness loans left unsold at the December 15, 1998 now expanding rapidly on a year-on-year basis byauction. The portfolio has been structured in 36 small increasingly servicing export markets outside of thetranches payable in cash and/or eligible securities; region. Domestic consumers may also have regainedand 10 large tranches (Bt 13-15 each in book value) some confidence, judging by a rising trend in sales ofpayable through a cash-flow sharing mechanism. The cars and automobiles at the end of 1998.cash flow-sharing model allows the bid winners topay 80 percent of bid prices in cash and/or eligible ... and Thailand's external environment is moresecurities, and 20 percent in accordance with a favorable...sharing agreement whereby the FRA is entitled to 20percent of net cash-flow over a 10-year period. The external environment looks much less

threatening than it did in the summer of 1997. TheEligible securities include Thai government risk premium of Thailand's sovereign debt has been

and government-guaranteed securities, and other baht- sharply reduced and Thailand's economy was resilientdenominated eligible securities. The latter include enough to weather the contagion effect of Brazil'sAMC paper, which is not government-guaranteed. As currency upheaval without serious consequences.the bidder of last resort, the AMC is expected to take Nonetheless, the prospects for Thailand's recoverypart in this auction--the first time since its remain intricately linked to the outlook for theestablishment in October 1997. To allow transparent depressed regional market in Asia - which accountscalculation of cash-equivalent prices of all eligible for 40 percent of Thailand's exports - and thie dangersecurities, the FRA has announced reference yields of a slowdown in growth in the USA and Europe.for all securities acceptable as bid payment. Non-


...but hopes of a speedy recovery are dim...Consensus Forecast Summary

While there are several encouraging signs, Average % Change on Previous Calendar Year.the road to recovery is likely to be a long one. Rising unless otherwise notednon-performing loans continue to undermine the 1997e 1998f 1999f 2000fviability of the financial system, restructuring of the Gross Domestic Product -0.4 -8.0 0.7 3.3huge corporate debt overhang has made little Private Consumption 0.1 -11.4 0.5 3.9headway, and the progress in privatization and public Gross Fixed Investment -16.0 -28.7 -1.3 4.9sector reform has been very modest. The social impact Manufacturing Production -0.4 -11.6 1.1 4.9of the crisis has pushed numerous people below the Consumer Prices 5.6 8.1 3.0 3.8poverty line and threatens to erode social cohesion. Money Supply (End Year, % change) 16.4 9.0 9.8 12.3

Merchandise Exports (fob. US$bn) 56.7 52.8 55.0 57.2With the economic crisis bottoming out, and a Growth rate (in dollar terms) 4.0 -6.9 4.1 4.0

more supportive environment for growth in 1999, the Growth rate (in volume terms) 9.2 8.8economy is positioned to recover modestly from a low Merchandise Imports (cif, US$bn) 61.3 40.8 45.0 47.7base. However, growth is likely to remain flat and Growth rate (in dollar terns) -13,4 -33.5 10.3 6.0may stagnate at a low level for longer than initially Growth rate (in volume terms) -11.8 -21.7

expected. Current account balance (US$bn) -3.0 13.8 9.0 9.8

.and the challenge is now to put Ti ailand on the Source: Forecast by Consensus Economics (February 1999), IMF,and historical data from BOT

track for the next decade of growth. e = estimate, f forecast

It will be difficult to sustain modest growthover the medium term unless it is supported by deeperstructural reforms. The prospects for a sustainedrecovery remain clouded by the slow progress indealing with the underlying structural problems of theeconomy. Whether modest growth (or a smallcontraction) will be replaced by faster growth in theyear 2000 and onward depends on the pace at whichinvestors and consumers regain confidence, corporateThailand can restructure debt and present viablebusiness projects to banks. Banks will only resumelending when they have restructured themselves,written off bad loans, and brought in new capital torecapitalize.

One of the biggest threats to suistainedrecovery is to declare premature victory. There is arisk that an incipient recovery generates a false senseof complacency that could erode the Government'sresolve to tackle difficult structural reforms.Thailand's prospects of a sustained recoveryultimately depend on how resolutely the governmentaddresses issues of financial and corporate sectorreform, how ably it manages the social impact andhow effectively it pursues structural reforms.


Table 1: Balance of Payments

(billion US$)

1997 1998

1996 1997 1998 Q2 P Q3 P Q4P Q1 P Q2 P Q3P Q4P

I. Current Account -14.4 -3.1 14.3 -3.1 -0.7 2.9 4.2 2.8 3.4 3.9

A. Goods and services -11.7 -0.1 17.4 -1.9 0.0 3.3 4.7 3.8 4.3 4.7

a. Goods -16.1 -4.6 12.2 -3.1 -0.9 2.5 3.1 2.6 3.1 3.4

Exports 54.7 56.7 52.9 13.7 14.5 14.9 13.2 13.0 13.3 13.4

Imports -70.8 -61.3 -40.6 -16.8 -15.4 -12.4 -10.1 -10.4 -10.1 -10.1

b. Services (net) 4.4 4.5 5.2 1.2 0.8 0.8 1.6 1.2 1.1 1.3

Services receipts 17.0 15.8 13.2 4.4 3.4 3.4 3.3 3.1 3.0 3.8

Services payments -12.6 -11.3 -8.0 -3.2 -2.6 -2.6 -1.8 -1.9 -1.9 -2.4

B. Income (net) -3.4 -3.5 -3.5 -1.3 -0.9 -0.6 -0.6 -1.1 -0.9 -0.9

Income Receipts 4.0 3.7 3.4 1.0 0.8 0.9 0.9 0.8 0.8 0.9

Income Payments 1/ -7.4 -7.2 -6.9 -2.3 -1.7 -1.5 -1.5 -1.8 -1.8 -1.9

C. Current transfers 0.8 0.5 0.4 0.0 0.2 0.2 0.1 0.1 0.1 0.1

II. Capital and Financial Account 19.5 -9.1 -9.6 -3.9 -3.8 -3.7 -2.4 -3.3 -2.0 -1.9

A. Capital account 2/

B. Financial account 19.5 -9.1 -9.6 -3.9 -3.8 -3.7 -2.4 -3.3 -2.0 -1.9

1. Private 18.2 -8.1 -15.6 -0.9 -6.9 -2.1 -4.0 -2.1 -3.1 -6.4

Bank 5.0 -6.3 -13.6 0.0 -5.9 -2.8 -1.2 -3.8 -4.4 -4.2Non-bank 13.2 -1.8 -2.0 -0.9 -1.0 0.7 -2.8 1.7 1.3 -2.2

Direct investment 1.5 3.2 4.7 0.6 1.1 0.9 1.1 1.5 1.2 1.0

FDI 3/ 2.3 3.6 4.9 0.8 1.2 1.0 1.1 1.5 1.3 1.0

Thai investment abroad -0.8 -0.4 -0.1 -0.2 -0.1 0.0 0.0 0.0 0.0 -0.1

Others loans 5.5 -3.8 -4.2 -0.8 -0.9 -1.9 -2.0 -0.8 -0.7 -0.7

Portfolio investment 3.5 4.6 0.5 1.2 2.4 0.4 0.4 0.0 0.0 0.1

Equity securities 1.1 4.0 0.3 0.9 2.2 0.5 0.4 -0.2 -0.1 0.1

Debt securities 2.4 0.6 0.2 0.3 0.3 -0.1 0.0 0.2 0.1 -0.1

Non-resident baht account 2.9 -5.8 -2.8 -1.8 -4.0 1.6 -2.3 1.2 0.8 -2.5Trade credits -0.1 -0.2 -0.5 -0.1 0.0 -0.4 -0.2 -0.1 -0.2 -0.1

Others 0.0 0.2 0.2 0.0 0.2 0.1 0.2 -0.1 0.2 0.0

2. Public 1.3 1.6 2.0 0.3 0.6 0.8 0.6 0.2 0.7 0.6

3. Monetary authorities 4/ 0.0 -2.6 4.0 -3.4 2.5 -2.4 1.0 -1.5 0.5 3.9

III. Allocation of SDRs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

IV. Errors and omissions -3.0 1.5 -2.9 1.1 2.1 -1.2 -1.0 -0.3 -1.0 -0.6

V. Overall balance 2.2 -10.6 1.7 -5.9 -2.5 -2.1 0.8 -0.9 0.5 1.4

Source: Bank of Thailand

Remarks: Other sectors (including state enterprise)

1/ Investment income only

2/ Comprise debt forgiveness, migrants' transfers, acquisition/ disposal of non-produced, non-financial assets, etc. Theseitems were previous, up to 1992, included in services and current transfers.3/ Excluding bank recapitalization4/ Including Bank of Thailand's borrowing and other offshore transactions."= Prelimninary


Table 2: Manufacturing Production(% changes since previous year)

1998 1999Weight Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan.

Manufacturing Production Index 62.4 -10.3 -11.6 -8.6 -8.3 -3.1 -5.3 -2.6 -1.0Food 6.0 0.0 1.1 1.4 5.8 6.8 14.1 2.7 15.3Beverages 6.6 -3.5 -3.8 -10.6 15.6 11.6 11.7 12.4 11.0Tobacco 1.9 5.0 -48.3 -21.5 -27.9 -9.1 39.8 -15.1 -13.9Construction materials 2.6 -47.5 -48.8 -35.3 -31.2 -25.9 -35.2 -20.2 -12.8Iron & Steel Products 2.1 -46.8 -45.5 -36.2 -33.5 -20.2 -6.1 -10.0 -19.0Vehicles and equipment 10.2 -58.1 -55.4 -37.0 -38.7 -15.2 49.4 70.7 47.5

Petroleum products 7.2 3.1 -0.9 -0.8 -17.2 -2.0 -24.4 -8.2 1.3Textiles 14.2 4.5 2.7 2.7 2.3 1.4 1.3 1.1 0.4Others 11.6 4.7 4.5 -3.6 -4.9 -8.7 -21.1 -21.1 -24.8


Table 3: Key Private Investment Indicators(% changes since previous year)

1998Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Private investment index 56.3 49.4 40.1 32.9 25.4 17.4 13.7 9.4 7.4 6.7(% changes of 12-month MA) -6.8 -8.9 -12.0 -14.4 -16.9 -19.6 -20.9 -22.3 -22.9 -23.2Import value of capital goods (baht) 24.2 4.5 -17.8 -7.0 -0.8 -9.7 -15.0 -22.0 -23.6 -17.6

Import value of capital goods (US$) -31.6 -35.1 -45.9 -38.2 -39.1 -36.0 -34.0 -31.6 -27.3 -12.4

Domestic cement consumption -34.6 -47.2 -50.6 -48.8 -51.7 -51.2 -34.4 -33.9 -36.4 -41.1Commercial banks'creditfor industry 33.5 13.5 11.1 10.5 9.9 0.6 -3.0 -6.3 -10.5

Commercial banks'credit for conis!ruction 12.0 6.6 26.7 9.9 14.3 11.8 11.0 9.9 6.7

Source: Bank of ThailandNote: Components of private investment index (in order of importance): 1) Import value of capital goods, 2) Domestic cementconsumptiori, 3) Commercial banks' credit for construction and manufacturing, 4) Construction areas permitted in municipal zones(whole kingdom), 5) Equity inflows, 6) Domestic sales of galvanized iron sheets (the construction of the private investment index isexplained in details in the BOT's monthly publication "Key Economic Indicators.")

Table 4: Capacity Utilization(percent)

Weight 1996 1997 1998 1999Ql Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2 Q3 Nov. Dec. Jan.

Food 3.6 62.5 31.0 23.6 30.5 64.5 26.5 23.7 32.6 24.5 22.9 32.6 42.2 74.1Beverages 5.7 81.8 87.2 88.9 107.6 68.1 83.9 81.8 89.3 73.2 73.0 89.1 103.9 50Tobacco 1.9 88.2 88.7 76.3 83A 86.4 80.1 79.6 57.3 58.5 53.1 56.8 56.5 65.3Construction materials 4.3 75.3 72.3 73.0 72.4 77.5 75.2 66.7 52.7 39.9 38.1 37.1 34.3 37.1Others 11.6 73.0 70.3 49.6 72.0 64.2 65.4 67.5 67.9 53.5 52.7 51.9 51.7 47.9Total 44.9 72.7 70.5 68.1 76.9 71.2 69.4 64.6 58.8 52.1 50.5 50.8 55.2 51.4

Source: Bark of ThailandNote: Details of compiling the capacity utilization numbers can be found in "Monthly Bulletin (April 1998)" from BOT. Startingwith the October 1998 Monthly Bulletin, the capacity utilization numbers for 44.9 percent of the manufacturing sector are nowavailable on a monthly basis.


Table 5: Major Crop Production

% shareof agri.prod. 1996/97 1997/98 1998/99 1996/97 1997/98 1998/99

(thousand tons) (growth rate)30.6 Rice26.2 First crop 17,782 :18,789 18,489 0.3 5.7 -1.6

Area (million rai) 57,291 56,958 56,738 -0.2 -0.6 -0.44.4 Second crop 4,550 4,791 45.3 5.3

Area (million rai) 6,437 7,231 38.2 12.34.4 Maize 4,426 3,831 4,986 9.1 -13.4 30.2

Area (million rai) 8,670 8,729 9,184 3.8 0.7 5.24.8 Tapioca 18,084 15,570 15,900 4 -13.9 2.1

Area (million rai) 7,690 6,665 6,685 2 -13.3 0.33.4 Sugar cane 58,977 45,850 46,025 13.1 -22.3 0.47.8 Rubber 2,121 2,169 2,162 9.2 2.3 -0.3

51.0 TotalSource: Agricultural production forecast, Department of Agricultural Economics(fax March 18, 1999)

Table 6: Regional Rice Economy, 1990-93 (averages)

Planted % Production % Yield Harvested Second Irrigatedarea (million (kg/ha) area (%) crop area

(million ha) tons) (%)North East 5.3 52.4 7.8 47.0 1612 93.7 1.5 16.7

North 2.2 21.8 4.3 25.9 1714 88.7 7.2 26.7

Central 2.1 20.8 3.6 21.7 2334 97.0 26.8 48.5

South 0.5 5.0 0.9 5.4 2012 87.1 5.5 2.9

Kingdom 10.1 100.0 16.6 100.0 1902 89.7 7.3 27.0

Source: Ministry of Agriculture (from Chris Dixon, "The Thai Economy: uneven development andinternationalisation," 1999, p. 154)


Table 7: Changes in Consumer Prices(year-on-year % changes)

1998Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

All commodities 10.1 10.2 10.7 10.0 7.6 7.0 5.9 4.7 4.3 3.5 2.9Foodandbeverages 12.1 13.1 13.6 11.8 7.4 7.3 6.7 5.8 6.0 4.7Rice and cereal products 41.6 37.9 34.0 27.0 15.3 11.2 8.6 4.8 1.2 -4.7Meat, poultry and fish 4.1 4.2 4.0 4.4 3.6 4.1 4.5 4.4 6.4 7.0Vegetables andfruits 10.8 21.2 28.1 21.0 1.5 7.3 9.0 11.5 13.6 9.1Eggs and milk products 12.0 15.2 20.3 20.3 18.3 15.5 15.1 13.6 12.1 11.4Other food bought from the market 9.6 9.8 10.5 10.7 9.5 9.1 10.1 9.4 11.0 9.5Non-alcoholic beverages 8.6 9.0 8.6 9.4 11.8 11.4 11.6 10.3 10.0 9.7Prepared food 9.0 8.9 8.4 7.5 6.5 5.8 4.3 3.6 3.6 3.1

Clothing 9.0 8.1 8.7 9.1 8.4 6.3 5.5 4.6 4.2 3.9Men's and boys' 9.8 8.1 8.0 8.1 7.3 4.7 4.7 4.6 3.9 3.6Women's and girls' 8.2 8.0 9.2 10.1 9.6 7.6 6.5 4.6 4.3 4.2Cloth and sewing services 8.6 8.9 9.1 9.5 8.7 6.6 5.0 4.7 4.9 3.8

Housing and furnishing 6.0 6.1 6.4 6.6 6.9 6.4 5.3 3.5 2.9 2.8Shelter 2.5 2.4 2.5 2.5 2.1 1.5 1.3 0.9 0.7 0.7Furniture and equipment 7.3 7.4 7.7 8.0 7.6 7.1 6.8 6.0 5.4 3.5Housekeeping and cleaning supplies 5.6 6.2 6.3 9.9 11.9 12.3 8.6 5.0 4.0 0.0Household textiles 9.3 9.8 8.9 9.0 9.1 8.5 6.5 3.6 3.1 2.5Electricity, fuel and water 18.2 19.0 19.9 20.2 22.9 22.3 18.6 11.9 10.5 11.1

Personal and medical care 7.9 8.7 9.5 10.2 9.2 9.7 9.9 9.0 7.8 6.4Medical care 6.2 6.3 5.9 6.0 5.1 5.7 5.3 4.1 3.2 2.0Personal care 9.7 11.3 13.8 15.2 14.0 14.3 15.2 14.3 13.3 11.6

Transportation and communication 10.7 10.9 10.7 10.6 8.3 5.4 4.4 1.8 -0.1 -0.4Vehicles 10.7 12.9 12.3 12.2 8.0 2.7 0.7 -2.1 -5.0 -5.3Public transportation 15.8 13.2 14.4 14.4 13.8 13.9 14.1 11.9 12.2 11.2Communica,tion and equipment 8.8 8.8 8.8 8.8 8.8 8.8 8.8 8.8 8.8 8.8

Recreation and education 7.7 5.2 4.6 4.6 4.3 3.9 3.9 3.2 3.2 3.1Recreation 6.8 6.8 7.5 7.5 6.5 5.9 5.8 5.3 5.2 4.8Reading and education 8.5 3.5 1.9 1.8 1.7 1.8 1.7 1.1 1.2 1.2

Tobacco and alcoholic beverages 21.6 23.1 26.4 26.6 22.5 20.8 13.6 10.4 10.1 10.0Non-food and beverages 8.7 8.6 8.8 9.0 8.2 7.0 5.8 4.1 3.3 2.9



Table 8: Capital Flows to the Private Sector 1/(million US$)

1997 1998 1998Year Q1 Q2 Jun. Jul. Aug. Sep. Oct. Jan-Oct

Bank -6,569 -1,472 -3,883 -2,523 -1,966 -1,494 -911 -2,042 -11,768Comrnmercial bank -4,727 623 -1,756 -1,665 -1,255 -497 -698 -909 -4,492

of which recapitalization 837 1,148 18 0 0 0 0 1,986BIBFs -1,842 -2,095 -.2,127 -858 -711 -997 -213 -1,134 -7,276

Non-bank -1,912 -3,055 1,599 383 943 200 99 -346 -558Direct investment 3,201 1,273 1,493 441 377 400 437 472 4,453

Foreign direct investment 3,641 1,287 1,528 451 387 410 447 475 4,534Thai direct invest. abroad -440 -13 -35 -10 -10 -10 -10 -3 -81

Others loans -3,783 -2,1 10 -1,064 -301 -20 -500 -213 -396 -4,304Portfolio investment 4,494 487 144 100 -15 -70 69 13 628

Equity securities 3,869 491 -27 40 -60 -75 60 87 476Debt securities 625 -3 170 60 45 5 10 -75 152

Non-resident baht account -5,839 -2,850 1,245 262 596 380 -199 -416 -1,244Trade credits -242 -82 -169 -50 -40 -60 -60 -15 -425Others 256 226 -49 -70 45 50 65 -3 333

Total -8,481 -4,527 -2,284 -2,140 -1,022 -1,294 -812 -2,388 -12,326

Source. Bank of Thailand and own calculations1/ Data is from BOT's Monthly Bulletin (November), converted into US dollars.


Table 9: Foreign Direct Investment by Sector (excl. FDI for recapitalization) 1/(million US$) 2/

1996 1997p 1998May P Jun P Jul P Aug P Sep P Oct P Jan-Oct

1. Industry 707.9 1859.5 83.6 282.5 102.9 151.5 206.8 438.0 1971.91.1 Food & sugar 45.1 222.2 1.8 26.8 3.5 2.0 5.4 6.6 69.81.2 Textiles 49.2 47.6 3.1 14.9 3.5 46.2 28.6 0.5 85.51.3 Metal & non metallic 112.5 210.7 21.0 21.0 23.8 67.9 25.6 14.9 330.01.4 Electrical appliances 240.5 588.0 2.7 50.3 30.9 10.6 63.1 -14.1 214.81.5 Machiinery & transport 108.5 410.3 32.0 118.5 27.6 15.6 62.3 227.8 684.51.6 Cheriicals 182.7 193.0 19.0 43.1 8.7 13.4 12.6 12.3 177.61.7 Petroleum products -249.8 14.4 0.0 -2.0 0.8 0.7 0.5 185.2 320.01.8 Construction materials 3.5 -12.6 2.6 0.0 0.8 0.2 0.0 0.0 3.41.9 Others 215.8 185.9 1.4 9.7 3.4 -5.2 8.8 4.8 86.1

2. Financial institutions 3/ 71.9 118.7 4.4 8.5 226.9 16.0 11.6 25.9 770.83. Trade 5 4.4 1082.1 132.0 88.7 100.9 56.7 -22.6 56.1 756.44. Construction 7).3 184.4 63.5 9.8 8.6 16.7 -8.7 5.2 177.75. Mining & quarrying 19.3 20.8 7.5 -3.2 4.8 10.1 -4.3 -10.5 30.26. Agriculture 2.0 1.2 0.0 0.0 0.1 0.0 0.0 0.0 0.57. Services 124.8 289.5 13.2 78.2 26.2 16.1 27.0 8.6 265.78. Real estate 751.8 110.5 2.6 2.1 1.4 0.5 1.7 2.5 18.99. Others -24.8 84.6 14.9 39.0 50.0 155.7 7.5 -0.8 448.8

Total 2267.7 3751.4 321.7 505.6 521.8 423.4 219.1 525.2 4441.0

Source: Bank of Thailand1/ Direct Investment = Equity Investment plus loans from related companies.

2/ Converted to US$ by average period exchange rate. As a result, the 1997 figure is slightly higher than US$ FDI reportedelsewhere (a yearly average of B/US$ 31.37 was used here).3/ Revised.P = preliminary


Table 10: Trade Indexes and Terms of Trade 1/

1995=100 1996 1996 (iih terms of US$)Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exports:Export unit value 108.9 107.9 108.7 109.1 109.2 109.0 109.3 109.4 109.1 108.8 108.5 108.3 109.3Export value 98.1 94.7 98.0 103.9 89.7 105.3 93.0 94.7 100.9 96.3 99.1 102.3 99.3Export volume 2/ 90.1 87.8 90.2 95.3 82.2 96.6 85.1 86.5 92.4 88.5 91.4 94.5 90.9Imports:

Importunitvalue 111.1 109.4 110.4 111.1 111.6 111.4 110.9 110.7 110.8 111.1 111.7 111.8 112.0Import value 100.2 103.4 98.3 109.1 105.1 105.5 98.3 98.4 104.9 92.6 102.0 96.6 93.1Import volume 2/ 90.2 94.5 89.1 98.2 94.2 94.8 88.7 88.9 94.7 83.4 91.4 86.4 83.1Terms of trade 98.0 98.6 98.5 98.2 97.9 97.9 98.6 98.8 98.5 97.9 97.1 96.9 97.5

1997 1997Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exports:Export unit value 105.3 109.7 109.6 108.9 108.0 107.2 106.5 105.7 104.7 103.7 101.9 99.7 97.6Export value 101.8 98.0 90.7 105.1 91.8 102.7 99.9 102.1 103.1 107.4 110.7 103.0 106.9Export volume 96.7 89.3 82.8 96.5 85.0 95.8 93.8 96.6 98.5 103.5 108.7 103.3 109.6Imports:

Importunitvalue 107.4 112.7 112.5 111.9 110.2 108.2 108.1 106.3 105.4 103.8 103.8 103.6 101.9Import value 86.8 103.1 85.7 98.0 99.1 91.8 94.8 89.9 91.0 81.3 77.1 67.2 67.1Import volume 2/ 80.8 91.5 76.2 87.6 90.0 84.8 87.7 84.6 86.4 78.3 74.3 64.8 65.9Terms of trade 98.0 97.3 97.4 97.3 98.0 99.0 98.6 99.4 99.4 99.8 98.2 96.2 95.8

1998Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exports:Export unit value 94.2 93.0 92.1 91.2 90.8 89.6 89.9 90.7 90.7 89.1 88.7 89.0Export value 90.2 93.7 101.4 91.6 90.5 96.7 98.2 91.0 96.3 96.7 94.3 97.7Export volume 95.8 100.8 110.1 100.5 99.7 107.9 109.2 100.4 106.1 108.6 106.4 109.8Imports:Import unit value 100.6 101.1 102.0 102.4 101.2 98.6 97.4 94.7 93.5 94.1 94.8 94.8Import value 56.6 54.7 61.2 60.4 55.3 60.8 61.2 56.2 55.0 58.0 57.0 56.5Import volume 2/ 56.3 54.2 60.0 59.0 54.7 61.6 62.8 59.3 58.9 61.6 60.1 59.6Terms of trade 93.6 92.0 90.2 89.0 89.7 90.9 92.3 95.7 97.0 94.7 93.5

Source: Bank of Thailand1/ From January 1996 onwards, base year was 1995 (1995=100) and the indexes are calculated using the Fisher chainedmethod.2/ Volume indexes are calculated based on the "factor reversal test".


Table 11: Secondary Market Spreads(basis points)

12/97 1/98 2/98 3/98 4/98 5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/99 3/12/99Thailand 476 452 300 254 274 308 392 419 760 650 545 325 333 300 255 243China 121 147 132 137 116 117 147 144 220 265 235 200 273 305 245 230Indonesia 469 629 649 520 543 773 826 751 790 1430 1300 788 1050 1150 950 950Philippines 466 526 390 357 349 355 355 428 428 730 595 405 428 415 390 400Source: Blooinberg

Table 12: Sovereign credit ratings

Moody's Standard & Poor'sForeign Bank Deposits Foreign Local Outlook

China A3 (stable) Baa2 (stable) BBB+ not rated negativeHong Kong A3 (stable) A3 (stable) A A+ negativeIndonesia B3 Ca CCC+ B- negativeSouth Korea Bal Caal BB+ BBB+ stableMalaysia Baa3 (neg) Bal (neg) BBB- A- negativePhilippines Bal Ba2 BB+ BBB+ negativeThailand Bal B I BBB- A- negativeSource: Paribas, December 28, 1998 (Moody's and Standard & Poor)

Table 13: NPLs of Financial Insitutions (end December 1998)

Amount(mil. baht) %

Thai Banks 2,329,234 49.31%8 Private Banks 1,292,540 42.19%Intervened Banks + KTB 1,036,694 62.45%Foreign Bank Branches 74,244 9.81%

All Banks 2,403,478 43.86%

Finance/Finance & Securities (35 322,134 69.82%companies)



Table 14: External Debt 1/

(million US$)

1996 1997 1998Q1 Q2 Q3 oct.P Nov.P Dec."

Total Debt Stocks (End of Period)Public Sector 16,805 24,323 26,814 26,963 28,556 31,070 29,484 31,500Govt and SOEs 16,805 17,166 17,695 17,524 18,268 20,086 19,654 20,305

Long-term 16,751 17,146 17,675 17,504 18,118 19,936 19,504 20,155

Short-term 54 20 20 20 150 150 150 150BOT (long term) 0 7,157 9,119 9,439 10,288 10,984 9,830 11,204

Use of IMF credit 0 2,429 2,672 2,796 3,017 3,098 3,037 3,239Others 0 4,728 6,447 6,643 7,271 7,886 7,706 7,965

Private Sector 73,731 69,093 64,922 61,163 58,136 58,036 55,373 54,651Long-term 36,172 34,277 33,575 32,827 32,192 31,930 31,466 31,338Short-term 37,559 34,816 31,347 28,336 25,944 26,106 23,907 23,313

Commercial Bank 10,682 9,488 9,147 8,747 7,823 7,661 6,935 7,059Long-term 2,314 3,824 3,167 3,971 3,638 3,746 3,721 3,738Short-term 8,368 5,664 5,980 4,776 4,185 3,915 3,214 3,321

BIBF 2 31,187 30,079 27,819 25,679 23,679 23,972 22,378 21.892Long-term 10,697 10,317 9,820 8,236 7,843 7,511 7,253 7,006Short-term 20,490 19,762 17,999 17,443 15,836 16,461 15,125 14,886

Non-Bank 3 31,862 29,526 27,956 26,737 26,634 26,403 26,060 25,700Long-term 23,161 20,136 20,588 20,620 20,711 20,673 20,492 20.594Short-term 8,701 9,390 7,368 6,117 5,923 5,730 5,568 5,106

Total 90,536 93,416 91,736 88,126 86,692 89,106 84,857 86,160Long-term 52,923 58,580 60,369 59,770 60,598 62,850 61,713 62,697

Short-term 1 37,613 34,836 31,367 28,356 26,094 26,256 24,057 23,463Bank foreign assets 7,362 8,887 8,744 11,201 12,564 13,542 12,801 11,892Gross official reserves 38,725 26,968 27,680 26,572 27,291 28,482 28,891 29,536Debt Service Payments 9,024 11,630 3,218 3,017 4,027 n.a. n.a. n.a.

Principal 3.822 6,072 1,894 1,673 2,664 n.a. n.a. n.a.Interest 5,202 5.558 1,324 1,344 1,363 n.a. n.a. n.a.

Public sector 1,845 1,959 514 496 656 n.a. n.a. n.a.Private sector 7,179 9,671 2,704 2,521 3,371 n.a. n.a. n.a.

Export of goods and services 73,497 74,431 16,833 16,291 16,624 n.a. n.a. 17,175Debt Service Ratio 12 16 19 19 24 n.a. n.a. 19

Source: Bank of Thailand1/ Short-term external debt is defined as debt that has an original maturity of one year or less.2/ BIBF's debt, which was compiled according to remaining maturity since the establishment of BIBF's activities in 1993 hasbeen adjusted to original maturity basis since January, 1996, consistent with other external debt items.3/ Non-bank debt is adjusted back to January 1997 based on the result of March 1998 survey and December 1997 bond datafrom IMF.Notes: 1. The revised definition of private sector debt has been made since 1986. It consists of three parts, namely commercialbank, BIBF and non-bank debt. 2. Total monetary authority debt includes the use of IMF credits and bilateral loans under IMFpackage. Structural Adjustment Loans (SAL) of World Bank and Asian Development Bank under the same package, however,are included in public scctor debt. 3. Debt service payments in private sector has also been revised to include principal andinterest payments on BOT debt since 1986.


Table 15: Central Government Balance

(million baht)

1996 1997 1998

Jun Jul Aug Sep Oct Nov Dec

Revenue(+) 853,201 847,696 78,610 52,296 45,300 60,023 47,360 59,466 55,460

Expenditures(-) 819,083 874,403 81,349 64,901 78,400 104,324 70,683 63,715 75,988

Budgetary cdeficit(-) or surplus(+) 34,118 -27,914 -2,739 -12,605 -33,100 -44,301 -23,323 -4,249 -20,528

Non-budgetary deficit/ surplus(+) 9,185 12,855 1,477 1,923 300 -7,281 4,549 2,251 602

Cash deficit(-) or surplus(+) 43,303 -15,059 -1,262 -10,682 -32.800 -51,582 -18,774 -1.998 -19,926

Financing:

Net domestic borrowings(+): -25,123 -16,380 1,539 -2,793 4,580 -1,747 -1,397 445 -553

- Bank of Thailand 1/ 2,054 -5,800 1,546 -2,559 4,594 -1,695 -529 447 -553

- Commercial banks -21,320 -710 43 -163 -32 38 -584 -1 -

- Govermnent Savings Bank -3,50,'0 -8,200 0 0 0 0 - -

- Others -2,287 -1,670 -50 -71 18 -90 -284 -1 -

Net foreign borrowings (+) -3,665 -3,747 -411 -375 -178 -1,032 -271 -214 -450

Government Pension Fund - -55,991 0 0 -160 -120 - - -

Gov't Bond for FIDF 0 0 150,000 0 50,000 0 100,000 - 100,000

Lending to FIDF 0 0 -150,000 0 -50,000 0 -100,000 - -100,000

Use of Treasury cash balances(+) -14,515 91,177 134 13,850 28,545 54,481 20,442 1,767 20,929

Source: Comptroller-General's Department and the Bank of Thailand

1/ Including Exchange Equalization Fund.The budgetary deficit/surplus is the balance between revenue and expenditure from the current year budget and carryoverexpenditure from the previous two budgets. The overall balance is a cash balance, which is composed of the budgetary balanceand the non-budgetary balance. The non-budgetary balance, reported above the line, represents mainly changes in deposits ofgovernment agencies at the Ministry of Finance which are of revenue-related and expenditure-related types.


Table 16: Budget Appropriations by Function

(million baht)

FY 1998 FY 1999

General governmental services 172,079 164,261General public services 39,987 36,855Defense 83,103 77,140Public order and safety 48,989 50,266

Community and social services 357,022 348,848Education 206,945 208,614Health 64,071 60,180Social security and welfare 34,048 36,636Housing and community amenity affairs 39,538 35,105Religious, cultural and recreational 12,421 8,315affairs

Economic services 215,517 196,257Fuel and energy 2,004 2,482Agriculture, forestry and fishery 63,284 61,288Mining and mineral resources, 4,167 4,715manufacturing, and constructionTransportation and communication 115,953 92,852Other economic services 30,110 34,920

Miscellaneous and unclassified items 85,382 115,633

Total 830,000 825,000

Source: Bureau of the Budget


Table 17: Budget Appropriations by Ministry

(baht)

Ministry Appropriation from Fiscal stimulusFY 98/99 budget 1/

Central Fund 76,910,473,900 8,520,000

Office of the Prime Minister 7,005,027,000 1,408,000

Ministry of Defense 77,066,937,000 141,000

Ministry of Finance 75,214,157,500 312,000

Ministry of Foreign Affairs 4,106,585,800

Ministry of Agriculture and Co-operatives 65,407,921,300 6,780,000

Ministry of Transport and Communications 56,923,817,400 2,275,000

Ministry of Commerce 3,942,541,500 14,000

Ministry of Interior 136,048,760,300 18,799,000

Ministry of Labor and Social Welfare 11,127,224,300 621,000

Ministry of Justice 5,068,054,900 585,000

Ministry of Science, Technology, and Environment 11,244,777,500 1,442,000

Ministry of Education 151,025,009,300 4,186,000

Ministry of Public Health 57,171,346,700 2,401,000

Ministry of Industry 3,880,803,300 3,693,000

Ministry of University Affairs 34,268,156,600 1,175,000

Independent Public Agencies 4,480,927,600 269,000

State Enterprises 21,787,478,100 1,000,000

Revolving Fund 22,320,000,000

825,000,000,000 53,621,000

Solurce: Bureau of the Budget1/As of March 17,1999


Table 18: National Government Actual Revenue- Classified by Major Sources(million baht)

1997 1997 1998Q1 Q2 Q3 Q4 Q1 Q2 Q3

Taxation 762,286 172,945 222,205 206,998 160,138 171,520 182,052 143,070Income taxes: 276,365 50,466 103,682 79,858 42,359 54,809 71,499 46,223

Personal 111,682 33,107 28,722 25,599 24,254 34,172 30,316 30,130Corporation 159,717 16,556 71,240 53,816 18,105 16,871 39,686 16,093Petroleum 4,966 803 3,720 443 0 3,766 1,497 0

Indirecttaxes: 485,921 122,479 118,523 127,140 117,779 116,711 110,553 96,847Import duties 94,813 26,328 24,682 24,121 19,682 16,720 14,357 14,917Export duties 14 3 3 3 5 4 4 8Business tax 394 74 66 167 87 100 104 142Value added tax 1/ 185,942 39,125 41,416 50,045 55,356 56,729 48,430 35,761Selective sales tax 175,159 45,609 46,334 45,934 37,282 38,258 41.348 38,429Fiscal monopolies 12,133 5,488 2,[34 3,112 1,399 1,014 2,614 4,252Royalties 6,471 1,482 1,495 1,551 1,943 2,257 2,334 1,966Licenses & fees 2,808 1,896 239 308 365 384 255 270Other taxes 8,187 2,474 2,154 1,899 1,660 1,245 1,107 1,102

Sales and charges 8,710 2,591 1,743 2,178 2,198 2,325 1,812 3,447State Enterprises 57,694 33,721 15,251 4,366 4,356 14,089 13,921 6,093

contribute & dividendsMiscellaneous revenue 19,006 4,466 4,691 4,640 5,209 5,206 7,016 4,942

and incomeTotal revenue 847,696 213,723 243,890 218,182 171,901 193,140 204,801 157,552

Source: Bank of Thailand1/ Including specific - business tax


Table 19: Summary Table on Unemployment

(thoiwsand)

Labor force status Feb-96 May-96 Aug-96 Feb-97 Aug-97 Feb-98 May-98 Aug-98 Nov-98Total Total Total Total Total Total Total Total Total

1/Total 59,750 59,903 60,045 60,351 60,649 60,949 61,098 61,248 61,400

Total labor force 31.898 32,504 32,750 32,000 33.561 32,143 32,170 33,353 32,716ICurrent labor force 30,741 31,035 32,586 30,964 33,455 30,892 30,168 33,276 32,4381.1 Employed 30,099 30,375 32,232 30,266 33,162 29,413 28,555 32,138 30,975

Underemployed (<20 hours/week)' 639 373 581 544 721 1,477 363 938 989

% of totallaborforce 2.0 1.1 1.8 1.7 2.1 4.6 1.1 2.8 3.0% of current laborforce 2.1 1.2 1.8 1.8 2.2 4.8 1.2 2.8 3.0

1.2 Unemployed 641 660 354 698 293 1,479 1,613 1,138 1,463% of total laborforce 2.0 2.0 1.1 2.2 0.9 4.6 5.0 3.4 4.5% of current laborforce 2.1 2.1 1.1 2.3 0.9 4.8 5.3 3.4 4.51) Looking for work 120 159 110 180 96 403 492 477 4602) Available /not looking for work 522 501 244 518 196 1,077 1,120 662 1,003

2.Seasonally inactive labor force 1,158 1,469 164 1,036 106 1,251 2,002 77 278% of total labor force 3.6 4.5 0.5 3.2 0.3 3.9 6.2 0.2 0.9

Unemployed + seasonally inactive labor 1,799 2,129 518 1,734 398 2,730 3,615 1,215 1,741force

% of total labor force 5.6 6.5 1.6 5.4 1.2 8.5 11.2 3.6 5.3Source: Labor Force Survey by National Statistical Office1/ The May round was skipped in 1997.2/ Line addecd by World Bank staff. Underemiployment is (arbitrarily) defined here as those employed working less than 20hours/week.


Table 20: Progress in restructuring in Thailand (BOT Estimate)

In Progress CompletedType of Business Million Baht C ases Million Baht Cases

Dec-98 Jan-99 Dec-98 Jan-99 Dec-98 Jan-99 Dec-98 Jan-99Agricultural 35,849 26,563 627 845 2,572 3,262 508 691Mining 1,320 1,642 41 59 1,911 1,954 28 32Manufacturing 296,418 310,629 1,517 1,769 51,088 66,278 893 1,106Wholesale and Retail 47,180 54,044 1,304 2,008 19,762 22,407 1,664 2,158Export 16,906 19,275 76 125 5,465 7,674 52 62Import 18,674 14,948 185 184 4,219 5,234 90 113Bank & Finance 23,946 26,256 136 149 2,710 3,758 33 44Construction 19,563 19,094 358 564 2,869 3,482 269 367Real Estate 115,428 122,278 685 874 33,733 35,732 380 454Utilities 23,301 28,807 110 202 4,729 5,865 183 236Service 58,331 61,550 716 1,066 20,086 21,945 910 1,171Personal 33,301 31,448 1,642 1,985 7,699 9,755 4,004 5,568Leasing 263 262 8 6 22 26 1 2Total 690,480 716,796 7,405 9,836 156,865 187,372 9,015 12,004Source: Bank of Thailand

Thailanid Economic Monitor - 35 -

Table 21: CDRAC-monitored Debt Restructuring Cases by Sector

(million baht)

Total debts% of total Credit Obligation Total % of totalnumber of

firms

Agriculture, hunting and forestry 0.6 860 860 0.1Fishery 0.3 335 335 0.0Mineral and rock mining 0.8 6,721 386 7,107 1.1Production 48.2 343,279 86,315 429,594 63.7Electricity, gas and water distribution 0.6 5,893 524 6,417 1.0Construction 5.9 20,972 8,891 29,863 4.4Whclesale and retail 11.6 21,890 2,539 24,429 3.6Hotel and restaurant 3.7 13,158 18 13,176 2.0Transport, warehouse and 5.4 34,011 23,317 57,328 8.5communicationFinancial brokering 2.3 4,061 44 4,105 0.6Real estate, leasing and business 18.4 72,185 21,953 94,138 14.0Health and social welfare service 1.7 5,438 61 5,499 0.8Commnunity, social and personal service 0.6 1,407 72 1,479 0.2Total 100.0 530,210 144,120 674,330 100.0


Table 22: CDRAC-monitored Debt Restructuring Cases by Type of Creditor

(million baht)

Type of creditor Credit % of totaloutstanding

Thai banks 237,238 44.7Foreign banks 14,584 2.8Finance companies (36 open) 53,657 10.1Finance companies (56 closed) 41,001 7.7Bangkok International Banking Facility (Thai) 34,530 6.5Bangkok International Banking Facility 43,052 8.1(foreign)Representatives Office 89,404 16.9IFCT and EXIM 16,741 3.2Total 530,207 100.0of which: Foreign 147,040 27.7of which: Thai 383,167 72.3



Thailand at a glance 9/8/98

East Lower- __ _POVERTY and SOCIAL Asia & middle-

Thailand Pacific income Development diamond*1997Population, mid-year (millions) 60.6 1,753 2,285 Life expectancyGNP per capita (Atlas method, US$) 2,800 970 1,230GNP (Atlas method, US$ billions) 169.7 1,707 2,818

Average annual growth, 1991-97

Population (%) 1.2 1.3 1.2Labor force (%) 1.5 1.4 1.3 GNP Gross

per primaryMost recent estimate (latest year available, 1991-97) capita enrollment

Poverty (% of population below national poveny line) 13Urban population (% of total population) 21 32 42Life expectancy at birth (years) 69 69 69Infant mortality (per 1,000 live births) 33 38 36Child malnutrition (% of children under 5) .. 16 .. Access to safe waterAccess to safe water (% of population) 81 84 84Illiteracy(% ofpopulation age 15+) 6 17 19Gross primary enrollment (%of school-age population) 87 115 111 Thaland

Male .. 118 116 i Lower-middle-income groupFemale .. 116 113 _

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratios*

GDP (US$ billions) 17.0 43.1 181.4 153.9Gross domestic investment/GDP 24.0 25.9 41.7 35.0 TradeExports of goods and services/GDP 20.2 25.6 39.3 47.0 TGross domestic savings/GDP 21.5 27.9 35.9 35.7Gross national savings/GDP 21.2 25.9 33.2 32.6

Current account balance/GDP -2.6 0.6 -7.9 -2.0 Dmsi lInterest paymentsiGDP 0.6 2.4 1.2 2.0 DomesticTotal debt/GDP 13.7 42.9 50.1 Savings InvestmentTotal debt service/exports 10.4 30.1 11.4Present value of debt/GDP .. .. 50.1Present value of debt/exports .. .. 120.0 -

Indebtedness1976-86 1987-97 1996 1997 1998-02 I

(average annual growth)GDP 6.0 8.7 5.5 -0.4 .. ThailandGNP per capita 3.7 7.2 4.0 -2.1 . Lcwer-middle-income groupExports of goods and services 8.9 13.5 -1.8 6.6

STRUCTURE of the ECONOMY1976 1986 1996 1997 Growth rates of output and investment (1/6)

(% of GDP) 20 -

Agriculture 26.7 15.7 11.0 11.2Industry 27.6 33.1 39.5 39.8 10

Manufacturing 19.7 23.9 28.4 28.8 oi--Services 45.7 51.3 49.5 48.9 ; 0 93 94 9s 99 \7

Private consumption 67.5 59.3 53.9 54.1 -20-General government consumption 11.0 12.8 10.2 10.3 GDI - GPImports of goods and services 22.7 23.6 45.1 46.4 D D

1976-86 1987-97 1996 1997 Growth rates of exports and imports (%)(average annual growth) Agriculture 3.8 3.4 3.8 1.2 25Industry 7.1 11.2 7.0 -0. 1 20 -

Manufacturing 6.2 11.3 6.9 0.2 15Services 6.3 8.2 4.6 -1.1 1tr

9-

Private consumption 4.7 7.6 5.2 0.0 0--General government consumption 7.8 5.9 9.5 -0.7 -5 - 92 93 94 95 96 97

Gross domestic investment 5.0 11.5 5.4 -19.0 ! -Imports of goods and services 4.7 13.7 -0.9 -10.0 Exports -lmportsGross national product 5.8 8.5 5.0 -1.1

Note: 1997 data are preliminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.


Thailand

PRICES and GOVERNMENT FINANCE

1976 1986 1996 1997 Inflation (_ )Domestic prices(% change) 8

Consumer prices 4.1 1.8 5.8 5.6 6Implicit GDP deflator 4.5 1.7 4.0 5.4 4

Government finance 2_(% of GDP, includes current grants) oCurrent revenue 12.4 15.0 18.9 .. 92 93 94 95 96 97

Current budget balance 0.7 -0.5 8.5 .GDP deflator CPIOverall surplus/deficit -3.6 -4.5 2.2 ..

TRADE

1976 1986 1996 1997 Export and import levels (US$ millions)(US$ millions)Total exports (fob) 2,980 8,872 56,001 58,431 80,000

Rice 422 775 2,012 2,080 70,000 IT. . 11]Rubber 260 577 2,513 1,900 60,000t F-IrManufactures .. 4,649 45,646 48,182 0,o 0 0

Total imports (cif) 9,448 72,768 63,286 40,000Food . .. 1,660 1,366 20,000

Fuel and energy .. 1,225 6,248 5,536 Capital goods . .. 34,222 31,367

91 92 93 94 95 96 97Export price index (1995=100) .. 62 99Import price index (1995=100) . 50 99 .. I [Exports S0 ImportsTerms of trade (1995=100) 124 100 .. jI

BALANCE of PAYMENTS

1976 1986 1996 1997 Current account balance to GDP ratio (%)1US$ mi//ions)Exports of goods and services 3,467 11,105 71,687 72,740 0Imports of goods and services 3,900 10,219 83,422 72,673 -1 91 92 93 94 95 96 9

Resource balance -433 887 -11,735 67 -2 }Net income -54 -864 -3,386 -3,576 -3

Net current transfers 47 225 761 446 -4

Current account balance -440 247 -14,360 -3,063 LFinancing items (net) 521 436 16,529 13,712 -74_L Changes in net reserves -81 -684 -2,169 -10,649 -

Memo:Reserves includino oold (US$ millions) 1.893 3.776 38.645 26.893Conversion rate (DEC. Iocal/USS) 20.4 26.3 25.3 31.4

EXTERNAL DEBT and RESOURCE FLOWS

1976 1986 1996 19971US$ millions) Composition of total debt, 1996 (US$ millions)Total debt outstanding and disbursed 2,326 18,505 90,824 .. B:100

IBRD 298 2,781 1,607 1,715 A: 1,607 D: 1,278IDA 11 109 100 98 - E:7,623

Total debt service 378 3,655 8,652IBRD 36 358 318 257 G 3 ,6/3

IDA 0 1 3 3 G:37,613

Composition of net resource flows

Official grants, 84 152 96Official creditors 109 294 634 ..

Private creditDrs 139 -505 9,630 ' F: 42,603Foreign direct investment 79 263 2,336Portfolio equity 0 31 1,551

World Bank program

Commitments 158 93 250 767 A- IBRD E - BilateralDisbursements 50 206 138 443 B- DA D- Other multilateral F- PrivatePrincipal repayments 15 129 198 155 c - IMF G - Short-termNet flows 35 77 -60 288 ___

Interest paynments 22 230 122 105Net transfers 13 -154 -183 184

World Bank 9/8/98


- * Government's spokesman bureau:SOURCES http:llwww.spokesman.go.thlindex/what-e.htm

* Data on investment, manufacturing, expenditure, D SUEbalance of payments, monetary variables, and trade are DATA ISSUESfrom the Bank of Thailand's (BOT) web page (monthlystatistical update, Key Economic Indicators, Databank., Export growth in US dollar terms or volume growth?all available at http://www.bot.or.th.) Other sources of While a downward adjustment in export dollar earnings hasdata include: Clarion Capital Asia: AsiaClock implications for the currcnt account balance, it is the

* Unemployment data in Thailand come from different: volume growth of exports of goods and non-factor servicessources, including (i) the national Labor Force Survey (and ultimately exports minus imports, or net exports) that is(LFS) which is conducted by the National Statistical important in the GDP growth forecast. In the officialOffice (NSO) three times a year, (ii) the number of forecast for 1999, export volume growth is projected topersons complaining about not getting severance reach 2 percent but import volume growth is projected topayments after being laid off reported by the Ministry reach 10.9 percent. Thus, net export's contribution toof Labor and Social Welfare (MoLSW), (iii) national growth in 1999 is already projected to be largely negative.censuses (three so far) conducted by the Department ofLocal Administration (DOLA), and (iv) NESDB The agricultural sector. Thai agriculture is dominated byestimates of the number of new graduates entering the extensive cultivation of rain-fed crops (the first crop), mostlabor force. We consider the Labor Force Survey the significantly wet rice which in 1993 accounted for 50most reliable source and have chosen to focus on those percent of the cropped area. Given that only 1;3 percent ofnumbers (BOT publishes the numbers on their website). the cultivated area is classed as irrigated, the main

* Data on tourism is from the Bangkok Post, Jones Lang constraints on agricultural production are the levels andWotton and Travel Impact Newswire marked seasonality of rainfall. The second crop is grown in(imtiaz @ loxinfo.co.th) the dry season and is therefore depending upon irrigation.15

* Real estate data is provided by Jones Lang Wootton(http://www.jlwthai.conV) in their monthly newsletter I The actual figure for 1997 is likely to be released in April"Insight." or May 1999 while the actual figure for 1998 is not

* The "Thailand at a Glance" tables are generated from expected until April 2000.the World Bank's "live data base." Some of the 2 In 1993-1996, December real sales rose on average 39numbers may differ from BOT tables because of percent over November. In 1997, sales rose by only 5.9differences in definitions and the use of different percent and in 1998 by 6.8 percent.exchange rates to convert baht numbers into US dollars. 3 Please note that the BOT's preliminary FDI and equity

figures are subject to very large revisions. For example, inLINKS the November Monthly Bulletin, the Jan-Oct 1998 FDI

inflow to the real estate sector was approximately $19Other Web sites on Thaila id worth visiting: million (table 51 and Ql figure is from table 51 in the

* BOT's Economic Research Department: August issue). In the December issue, the numbers havewww.bot.or.th/research/public/econpage.htm been revised and the Jan-Nov figure is now $5293 million

* Privatization Masterplan: www.mof.go.thWSEPC/ [sic!].* Fiscal data: www.mof.go.thWfiscal/ 4 The key assumptions related to the export target are* Board of Investment: www.boi.go.thl/ spelled out on the Ministry of Commerce's web page at* Social Sector Program Loan: http://www.sspl.org/ http://www.moc.go.th/thai/dbe/economic/targete.html.

5 Short-term external debt is defined as debt that has an* National Statistical Office (for employment data): oiia auiyo n ero eshttp://www.nso.go.th/ Drigial matunty of one year or less.Thai Rating and Information Services: 'In the IMF program, net international reserves is definedwwwwtrwssetet.or.th as gross reserves minus forward/swap obligations minuswwwtnstockExchanget.cof.thailand: wwwstortIMF borrowing (currently at $3.1 billion of the $4 billionCuStock Exchange of http ndww w .s.o.th has been disbursed).

* Customs data: http://www.customs.go.th/ (the Customs BOT doesn't publish disbursements under the financingDepartment's web site contains a data base with volume package as a separate capital inflow under "monetaryand baht value numbers for all export and import authorities" (BOT Monthly Bulletin, table 42). The largecommodities.) balance of payments support capital inflows are concealed

* Ministry of Commerce: in the BOP category "Monetary authority" because at thehttpr://www.moc.go.th/thai/dbe/dbe engkkl .htm same time, BOT recorded large capital outflows to unwind

forward/swap obligations. The only way to get an estimateof the amount of disbursements is to look at increases in


the monetary authorities' stock of external debt. Thenumbers presented in the figure 20 are meant to give an ideaof the size of borrowed reserves.8 The public sector lacks consolidated figures, including aconsolidated public sector debt figure. In the absence of anofficial number, we have calculated public sector debt in thefollowing way: total CG domestic debt (Table 29, MonthlyBulletin) + SOE domestic bonds (Table 30, MonthlyBulletin) + public sector external debt (Table 45, MonthlyBulletin) + external debt of Monetary authorities (Table 45,Monthly bulletin), converted into baht by the end of periodexchange rate.9 For more details, see synopsis of Economic Minister'sCouncil Meeting, February 15, 1999(http://spokesman.go.th/e-cab99/ecoO215e.doc). Please notethat the WB's EFAL have mistakenly been counted in both1998 and 1999. FCRL ($350 million) was disbursed inDecember 1997, EFAL ($400 million) was disbursed inDecember 1998, and EFAL II ($600 million) will bepresented to the Board of the World Bank in March 1999.'° We calculate the deposit rate as weighted average of thesavings rate and the 3-month time deposit rate. We weight itby using the share of demand and time 6eposits of totalcommercial bank deposits (Table 10, Monthly bulletin). Weignore the demand deposits, which accounts forapproximately 2 percent of total deposits because we don'thave an interest rate for demand deposits." The midpoint of the range of the minimum lending rate(MLR), as offered by the four largest commercial bank anddeflated by CPI.12 For Thailand, the graph is measuring Thailand'ssovereign bond coupon of 7 3/4 percent maturing on04/15/07 spread's above equivalent US Treasuries.13 According to NESDB, "Summary on Thai EconomicPerformance in 1998 and Medium Term Trend," December28, 1998 (http ://www.nesdb.go.th/download/eco3-98.exe)14 "Dry" and "wet" refers to the results of the Labor ForceSurvey conducted in February and August, respectively. InKakwani/Pothong's paper, the results of the May LFS arenot included, probably because the May survey wasn'tconducted in May 1997.15 From Chris Di.son's "The Thai Economy: Unevendevelopment and intemationalisation," Routledge, London1999, page 153)

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