tns 12564

Transcription

tns 12564

Public Disclosure Authorized
The World Bank
19720
oft
CD
FEBRUARY1999
3
0
0
C)
a
0
Bangkok,
February 1999
World Bank Thailand Office
14th Floor Tower A
Country Director: J. Shivakumar
Diethelm Towers
Comments to:
93/1 Wireless Road
Bangkok 10330, Thailand
(662) 256-7792
Stefan Koeberle, Lars Sondergaard
[email protected]
[email protected]
U
Thailand Economic Monitor: Executive Summary
Recent developments
*
Thailand' s recession has stabilized but the signs of recovery
are mixed. Manufacturing production increased from the montht of
November but not enough to expand year-on-year. The overall yearon-year decline in December was only 1.8 percent, compared to 3.4
percent in November. Expansion in the vehicles and equipment
sector continued, expanding by 94.5 percent in December. Capacity
*
The hope for export-led recovery remains elusive. Export
volumes expanded by 2.4 percent in November, reflecting an
increase in all export commodities, with the exception of laborintensive goods. Export prices fell by 10.9 percent on a year-onyear basis in November, off-setting the expansion in volume terms.
Thus. in US dollar terms, exports contracted by 8.7 percent in
November when compared with November 997. Imports in US
dollar terms decreased by 15.2 percent from the same period last
utilizatiovemeroe
a
54.2 percent in
December. from 50.5
November and 54.2 percent in October.
November's trade surplus amounted to $1t,025 million, similar
to that of the previous month. The current account has recorded
myear.
*
Progress on legal reforms. The stock market rose from 313.65
on February 12 to 347.43 on February 13 following news that the
Senate approved an amended version of a bill establishing a
bankruptcy court, the first of four vital bankruptcy- and foreclosure
reltedbils
te uperhose.Pasingthee
t pas
rfor
bils asAugust
related bills to pass the upper house. Passing these reforrn bills has
been viewed by many observers as key in restructuring the large
amount of corporate debt. Without the threat of swiftly having their
loan collateral seized and sold off, firms have little incentive to
restructure.
-)
remains modest. Consumer prices
Inflation
rose by 0.4percent
*
Inflation remains modest. Consumer prices rose by 0.4 percent
in January compared to December, the first increase in five months,
as a weaker baht and higher oil prices made imports more
expensive. CPI inflation for 1998 was 8.1 percent and is expected
to be between 2.5 to 3 percent in 1999.
monthly surpluses throughout 1998 in the order of $1,100-1,200
million, largely due to the large import compression.
*
Unemployment has increased from 1.1 million recorded in
.
.
.
to an estimated 1.5 million in the November Labor Force
Survey, according to preliminary numbers . Since this survey is the
first to be conducted in November, it is difficult to assess whether
the increase is significant or simply a result of the large seasonal
fluctuations in the labor market.
The Bank is negotiating its second Economic and Financial
Adjustment Loan (EFAL II) for $600 million, scheduled for Board
presentatonn MArch. The Jpns
gonmenthwill
pr
Soar
mnillionin inparallelfinancing.
B The Thai baht has remained remarkably stable in spite of
Brazil' s devaluation and depreciated only slightly against the dollar
in January. The average exchange in January was 36.6 to the US
dollar, compared to 36.2 in December. On February 18, the baht
was trading at 36.9 baht to the dollar.
*
Financial support for Thailand as a part oi Japan's planned $30
billion Miyazawa Initiative for the region is likely to amount to
$1,850 million. This will cover funding from JEXIM for a loan for
manufacturing sector support and EFALII, as well as OECF support
fanuEconomic
Rectovry andScAL Secto,
am Oan andpan
Agnrcultural Sector Program Loan. In addition, a trade insurance
facility of about $500 million is being considered.
*
In December, liquidity in the money market remained high,
resulting in further declines in money market rates. The minimum
lending rate (MLR) has also come down, albeit at a slower rate. On
February 18, the midpoint of the range of MLR offered by the six
largest commercial banks had fallen to 11 percent, down from 11.3
percent in January and 11.8 percent in December. However, a lower
lending rate will not necessary imply new lending. Economic
uncertainty and the high cost of provisioning for bad loans have
been cited as the two most important factors holding back new bank
lending.
* Assessment. With fiscal and monetary policy in place to
support growth, and production consolidating at an extremely low
base, Thailand is likely to see modest growth in 1999. However,
cautious optimism is overshadowed by continuing vulnerability to
extermal shocks and growing concerns over the impact of a water
shortage on the agricultural sector. A key question is to what extent
Thailand will be able to address the structural problems that led to
the crisis in the first place and that are now hindering a sustainable
recovery. There are encouraging signs that key bankruptcy and
foreclosure legislation will eventually be adopted to provide the
basis for corporate restructuring and resolving the financial sector
crisis. However, the challenge over the coming months will be to
avoid a false sense of complacency as the first signs of recovery
emerge.
The views expressed in the Thailand Economic Monitor are entirely those of the authors and should not be cited without prior permission. They do
not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. The material contained herein has
been obtained from sources believed reliable but is not necessarily complete and cannot be guaranteed.
Thailand Economic Monitor
-3Figure 2: Production of automobiles
(seasonally adjusted)
Overall production is still declining...
60
MantJfacturing production picked up in
December. The level of output in December increased
by 7.5 percent over November and some sectors are
now expanding on a year-on-year basis (Table 3).
However, the overall manufacturing production index
is estimated to have declined by 1.8 percent in
December on a year-on-year basis, compared with a
3.4 percent decline in November, and a 2.6 percent
decline in October (Figure 1). Despite the large level
of output in December, capacity utilization in the
manufacturing industries remain low at 54.6 percent,
reflecting the fact that the manufacturing sector is
producing at a level of production similar to that of
1994.1
Figure 1: Manufacturing production index
130
125
120 +
115
-'--
1995
---------
1997
-
v
> n vC ,
v
, ...
z
C,
Z
z 2 ;
o z
Other sectors are also showinigimiprovenments.
While the overall manufacturing production is still
being pulled down by large year-on-year declines in
theproduction of construction materials (14.5% of the
manufacturing sector), production is picking up in
several other sectors (Table 3). The textiles sector,
which accounts for 10 percent of the manufacturing
sector, has been expanding throughout the crisis.
Productionof beverages,notablybeer and liquor,has
996
1998
-
ii ko100
95t
90i
30
20
-..
~
.
85
80
been expanding for four consecutive months, and the
food industry has also turned around. Other
manufacturing
n / \ ~^ -. industries (8 % of the total) are still
shrinking: the production of induction motors
contracted by 14 percent on a year-on-year basis in
November, compared with declines of 46 percent in
October and September.
...but pockets of the manufacturing sector are now
expanding.
.. .and private investment indicators are bottoming
out.
Recovery in the vehicles sector. The vehicles
sector appears to be on the path to recovery,
expanding by 94.5 percent in December 1998 when
compared to D)ecember1997. Following the dramatic
slump in domestic demand for vehicles in 1997, most
large auto assemblers had announced that they were
severely cutting back operations by November 1997
(Figure 6). The production figures show a staggering
decline in the months following the crisis: from
37,732 cars produced in the month of June 1997 to
only 5,996 cars produced in December 1997. Since
then, the vehiicles and parts sector has gradually
expanded production (Figure 2) by shifting
increasingly to producing commercial vehicles for
export markets.2
Several indicators of private investnmenthave
stabilized. BOT's 12-month moving average of key
private investment indicators continued to contract by
23.2 percent in November. However, several
indicators have stopped plummeting in recent months,
including sales of iron rod and galvanized iron sheets,
domestic cement consumption, and imports of capital
goods (Figure 3, Figure 4 and Figure 5).
Thailand Economic Monitor-4Figure 3: Domestic galvanized iron sheet sales
Domestic consumption has stabilized...
Car sales picked up at the enidof 1998. The
45,000)
~~~~~~~~~~~~sharp
decline in income, wealth, and the rise in
40
35~
resulted in a large declrine in private
consumption in 1998, estimated to have shrunk by 15
percent. The sharp decline is most vividly reflected in
domestic passenger car sales which plumrneted from a
.unemployment
30 001
25158)-
i20,000
~~~~~~~~~~~monthly
averageof 14,628in the first ha:Lfof 1997 to
15,000-
io,00o
515)0
~
-
-
----
~
0--
around 3,500-4,000 in the months that followed.
1996
1998
]
--
~~
~
~
~ oseaiyIn
~~~~~~~
~taiyand
Figure 4: Imports of capital goods (US$)
3500
3000
.
.
-mre
2500
-cars
2000
.
.*plummeted
1500-'
1000
1000-'
recent months, sales have been climbing
soared in December to 6,479 cars sold.
Car sales usually rise sharply in Decemnberbut this
year's rise was extraordinary with 69 percent more
cars sold in December as compared withi November.
However, it is unclear whether the surge i'n December
was real or a result of auto manufacturers reporting
~~~~~~~~~~~higher
sales to make their total sales in1998 look
attractive. Preliminary numbers for passenger
sales in January show that passenger car sales
to 2,077 units, suggesting that the surge in
December may have been artificial.
--1996
~------1997
500
Figure6: Salesof cars and motor-bikes
~~~~~~~~~~~~~(seasonally
adjusted)
1998
~~ 8. ~~~~~~'
~~~1
8
8
120
~16Figure 5: Domestic cement consumption
*.
12
-80
210
3,500-v.
-60
8
c
4,000 v
-
',,4
~~~~~~~~
~~~~~~~~~~~~~
......
Sales of cas4
O~~~~~~~~~~~~~~~~'
.D
r--
2,000
20.
Sales of motobks2
r--
r-
2
cc
cc
cc
cc
1,2000
.1,500
-0------
1995
-T
-- 1996
500
0
8.dramatic.
~~
.~~~~
-
The adjustment in retail sales has been less
Real retail sales continue to be at a lower
~~~level
8
than in 1997 but the new lower level appears to
z
~~~robust
(Figure 7). Real retail sales fell by 7.9 percent
in November on a year-on-year basis compared with
declines of 8.8 percent in October and 12.1 percent in
September. Retail sales num-bers are still unavailable
for the usually large spending month of December but
the large number of visiting tourists, and the positive
developments in a number of other variables suggest
that retail sales should have risen sharply as well.
-
Figure 7: Real retail sales index (1993=100)
Annual inflation continues to fall.
Consumer prices rose in January from
December, the first increase in five months, as a
weaker baht and higher oil prices made imports more
300,
~
250-
~
t
15l -
>
{1
~ 100
was attributed to a weaker baht that made exports
-/
1995
-
1
expensive. The increase of 0.4 percent over December
~~~~~~~~~~~slightly
e
more expensive. Meanwhile, the price of
crude oil futures rose about 6 percent in January.
Thailand's annual inflation rate was 3.5 percent in
1996
50 X----1997
0
p
A
200- -
-
January, the lowest since September 1993. Year-onyear inflation was at least 10 percent from April to
1998
l
-
< -t
5-
S Q<
:
°
o
July in 1998, peaking at 10.7 percent in June.
z
Figure 9: Changes in prices
~-
25--~~~-P
Rising vacancy rates and failing prices but no sales
in the real estate sector.
20
All real estate markets experienced falling
demand and rentals and rising vacancy rates in 1998
when compared with 1997. Vacancy rates in the oi e
space market has risen to 29 percent as of January
1999 while rents and prices in this market fell by
some 20 percent in 1998 as compared with 1997. The
prime retail market also suffered, with rentals
declining 28 percent and capital values declining by
30 percent year-on-year. Vacancy rates in the retail
market have improved somewhat from 24 percent in
July 1998 to 22 percent as of January 1999. The
market for luxury condominiums experienced declines
of the same magnitude.
-------- Wholesale pnces
..
.---
15
lo -
-5
10
r vc
00
o
>
z
oc
00
>,
-
z
Market responds favorably to progress in passing
Figure 8: Average rentals and capital values of
office space (Bangkok CBD) (US$ Terms)
_
300
reform bills.
Thai stocks went on a roller-coaster ride in
3,00
_
S
.200
2.000t
$150-
1,00>t
-^ :from
lo
->
100
E
50
-
500
0 oX
+ W+
s m)
a
It
Ie
.=
n
+ + + +
Inm
m)
=
Annual Net Rentals
Source:Jones l_angWotton
c
-
r-
r-
a~ =
+ + 0 Z
13o :^ o >
x0
oo
.n
s
CapitalValues
=
February. At the beginning of February, Thai stocks
plummeted following announcements of high levels of
-NPLs of banks, and reflecting the market's doubts
about the government's ability to pass reform bills. By
February 12, 1999 the SET had slipped to 313.65
its high of 402.56 on January 6. The plunge was
reversed on February 13 with the SET reaching
347.43, when the Senate approved an amended
version of a bill establishing a bankruptcy court. The
Senate is reviewing three additional bankruptcy- and
nforeclosurerelated bills which are consideredvital to
speed up corporate debt restructuring.
-
6-
Figure 10: Stock market index (end of month)
Figure 11: Changes in exports
700
A
Expor1unit value
Export value
~ ~~~~
i
~~~~~~~~~~~25
----Exportvolunrr
600
2{0
05
ee-~~~~~~~~~~~~~~~~10,
100 1l
N
CN
N
I
CC
90
:5
50
J
9C
~~~~~~~~~~~~~~~~<
EXTERNALSECTOR
The growth rate of export volumes is slowing
down...
Export volumes expanded by 2.4 percent in
November, reflecting an increase in all export
commodities with the exception of labor-intensive
goods. Export prices were still declining in November
1998 but at a slower pace than at the end of 1997.
Export prices fell by 10.9 percent on a year-on-year
basis in November, off-setting the expansion in
volume terms. Thus, in US dollar terms, exports
contracted by 8.7 percent in November when
compared with November 1997.
<
Preliminary numbers for December indicate
that exports decreased by 9.4 percent in US dollar
terms on a year-on-year basis. For all of 1998, the
country's exports in 1998 amounted to $52.8 billion, a
drop of around 7 percent, or $4 billion down from the
previous year. In baht terms, exports totaled 2.24
trillion baht, an increase of 346 billion, or 24 percent.,
from 1997. -
z
oC
fiC'
N5 L
T.
9
The country's top ten export items included
computer and parts, electrical appliances, garments,
electronic circuits and components, rubber and rubber
products, rice, jewelry and ornaments, canned
seafood, plastic and plastic products, and frozen
shrimps. Thai exports are increasingly moving away
from the region, toward the EU and the US.
Figure 12: Destination of exports
Fit h.lf 1997
N-98
Re,tF
No-9S
KX%
R-.f
d
2o ,Chi
Chin
Ko-g)
5od.
ln
N
The recent slowdown in export volumes
(Figure 11) has been attributed to increased
competition, an appreciating baht, and the fact that
numbers are now being compared to periods in the
previous year where export volumes were already
high. The slowdown in exports appears to have
happened across the board with the exception of
fishery products where exports were increasing in
November.
DS
00
h-E
15%
IS%
... while the declines in import volumes are
decelerating.
Imports totaled $3.3 billion in November and
$3.5 billion in December, considerably lower than the
average of $5.6 billion six months prior to crisis. In
recent months, imports of capital goods and raw
materials have picked up but imports are still at a
lower level than in the same period in 1997. In US
dollar terms, imports of capital goods and raw
materials were still contracting by 15.1 percent and
6.6 percent, respectively, on a year-on-year basis in
November. However, these rates of declines are
considerably lower than the rates of decline in the
second quarter of 1998 where imports of both
commodities contracted by more than 30 percent
when compared with the same period in 1997.
Thlailand Economtic Monitor
-
Imports in 1998 fell by 33.5 percent, or $20.5
billion, to $40.8 billion. The top ten import items
included electrical machines, machinery, chemicals,
electronic circuits and components, crude oil, basic
metals, computers and peripherals, electrical
appliances, steel and iron, and textiles.
Figure 13: Changes in imports
0
-A--Import
umt value
-------- Import volume
9
~
\/5
~
_
o
' /
.
c -20
1
\'
/
e-25 l
t
;
~
'
~
<
-15 -
value
-Import
.
-30
1
*
\/\'
t
/
35
-401
\4/$54
7... but the capital account continues to register
large capital outflows...
The current account has been in surplus since
September 1997 but the capital account has been
recording massive capital outflows. The current
account surpluses continue to help build up foreign
reserves but they are partly being offset by continuing
t
large private capital outflows. The outflow of private
capital started prior to the crisis in the second quarter
of 1997. Since June 1997, the amount of private
capital leaving Thailand has amounted to $13.9
billion in the second half of 1997 and $21 billion in
the first eleven months of 1998, a total of $34.9
billion in 17 months, approximately 30 percent of
GDP in 1998.3If one adds the amount of capital used
by the central bank to unwind future/swap obligations,
the amount of outflows in the same period is close to
billion.
-45
-50-
-
-
5-
.<:
.-
>< X ° S Cu
t
The current account surplus for all of 1998 is
likely
to sur-as- $13.5 billion..,
The trade account continued to record a
serplus of a1pproxiately $1 billion in Novemberand
Decesinber 1998. Coupled with a surplus on the
services and oransfersaccount, the result was a current
account lur
of $112 million in November,
slightly lower than last month at $1,275 million,
Thailand registered a trade surplus of 471 billion baht,
or $12 billion in 1998. In view of the large trade
surplus in December, the current account surplus for
all of 1998 is likely to reach around $13.5 billion,
corresponding to approximately 12 percent of GDP.
Figure 14: Current account to GDP ratio
centr Where has all the m7oney gone? First, the
central bank has used a total of $19.1 billion to
unwind its offshore stock of swaps and forwards,
leading to a buildup of net reserves (Figure 19) and
thereby lowering sovereign risk. The majority of the
large amount private capital outflows has been used to
repay short-term debt. At the end of 1997, short-term
debt was $34.8 billion, already down from $45.1 in
March 1997. By November 1998, the amount of shortterm debt had been reduced by almost $10.8 billion to
$24.1 billion (Figure 16). Oddly, private capital
outflow was also a result of increasing foreign assets
in the banking sector. The foreign assets of banks
increased by $3.9 billion from end-December 1997 to
end-November 1998 from S8.9 billion to $12.8
billion.4
Ii
15
107
|
>
-5
|
*
Figure 15: Private and public capital flows
3
2 4
_
*
Private
Public
i
L[ { Dl
~~~ ~
i
~~~~~~~~~~~~~~~~-2
-6C
*i*l-7
outflows
-8
92
93
94
95
96
97
98e
99fc
c
-
-
8-
Figure 16: Long- and short term external debt'
Figure 18: FDI by country (excl. US$ 2.1 for
recapitalization)
Long-term
100,000
Short-term
-Total debt (% GDP)
90,000
80,000
I
70,000
I)00
1600
90
1400-
80
~~~~
60,000~~~~~~~~~~~~~~~~10
1
50,000
5
40,000-
40
30,000
3
20,000
2020
0
-U
o
o0
O1
a
m.tV
-°
... despite record high levels of foreign direct
investment.
Foreign
direct
investment
(FDI)
1997
reaches
record levels in 1998. Foreign direct investment in
1998 reached US$7.6 billion, the highest leveLin the
country's history, compared to US$3.6 billion in 1997.
A total of US$2.1 billion of this amount was
accounted for by recapitalization of the banking sector
anid only US$5.5 billion for non-bank sectors. By
October 1998 (latest available data), the industrial
sector had accounted for 44 percent of non-bank
capital inflows, followed by 17 percent in financial
institutions and an equal amount in trading and
holding companies (Figure 17). Japan continued to be
the largest investor, followed by the EU and USA
(Figure 18).
Figure 17: FDI by sector (excl. US$ 2.1 for
recapitalization)
0~~~~~
0N
~
_
Gross reserves are growing and offshore forwards
and swaps have been unwound...
Gross reserves have been increasing steadily
throughout 1998. On February 5, gross foreign
reserves totaled $29.4 billion, up from $27.0 billion at
the end of 1997. Equally important, total forward
obligations were brought further down to S5.3 billion
on February 5 from $18 billion at the end of 1997, and
the remaining is reported to be onshore obligations.
Forward obligations incurred in defending the
exchange rate were a serious source of concern in the
wake of the economic crisis, amounting to over $29
billion in July 1997. As a result of the unwinding of
forward obligations, net international reserves have
been climbing steadily from less than $1 billion in
August 1997 to approximately $21 billion by
February 5, 1999.6
Figure 19: Official reserves
2500
Net forward obligations
G
Jan-Oct1998
i25
a,'
',
--
17
0
1
Net internationalreserves
-1I-----
30
'-.
~~~~
.- '
Q
t500
- Gross international reserves
--
,
3
1500
z
Jan-Oct 1998
0
c
'0
C:
N
cm ~~~~~~~0
I
~~~~~~~~~~~~_
0'
-
~in
70
11lX,_,
0~~~~~~~~~2
R
]
<15
1
1
1
110
/
10~~~~~
t-
0-
0-
cG
z>
o0
oo
o
7-
cc0
cc
0
>
1
-
-9-
...but the buiildupof reserves has taken place with
borrowed money.
.. .but unexpected non-tax revenues prevent the
government from reaching the IMF target.
Balance of payments support under the $17.2
rescue package has been crucial to help buildup
reserves. The large buildup of net reserves is only
partly a result of large current account surpluses,
equally important has been the balance of payments
support provided by the fMF, the World Bank and
bilateral donors. As discussed, the large current
account surpluses were partly offset by large capital
outflows. Thus, the main reason why net reserves
were still increasing was because the Bank of
Thailand has been building up reserves with money
borrowed under the financing package. While the
BOT does not publish the amount of disbursement
under the financing package, increases in external
debt owed by the BOT give an approximation.7
The ciumulative deficit at Bt40.7 billion for
the first quarter of the 1998/99 fell short of the IMF
target at Bt6O billion. Revenues shrank by 17.5
percent in December when compared to December
1997. The decline was a result of the large contraction
in the collection of value-added tax, corporate incomc
tax and import duties. The government's cash balance
recorded a deficit of Btl9.9 billion in December,
resulting in a cumulative deficit of Bt4O.7 billion for
the first quarter of this fiscal year. In the Sixth Letter
of Intent, the government had agreed to aim for a
deficit of Bt60 billion in an effort to jump start the
economy.
Figure20 Estimate
.
of amount of borrowed
Fgr2:Esiaesof
reserves
One major reason for not achieving the IMF
target is that the government received unexpected
non-tax revenues from accumulated interest payments
from the Ministry of Defense's deposits in commercial
banks before purchasing armament. The amount was
2
Btl3.7 billion and was received in November.
Another source of unexpected non-tax revenue of
16 _
B
-- Net
r
internationalreserves
Bt4.0 was due to lack of disbursement from IFCT's
foreign loan. This amount was remitted to the
Treasury in December 1998 and is expected to be
disbursed in March 1999.
14 12lo
Qa 6
~
4
| |
/
|
11 |
|
|
|
l
r__ 00 00 X
m. ,. c
Z
x
The fiscal stimulus may not become effective for
several months.
The much neededfiscal stimulus is unlikely to
00
become effective soon,pending the release of donor
z22
monev. A vital component of the IMF and the
government's attempt to revive the economy is the
widening of the fiscal deficit to 5 percent of GDP.
The
POLICIES
MACROECONOMIC
Government expenditures increase in December...
In December, government expenditures
expanded. However, part of the fiscal expansion was
due to interest payments on new FIDF bonds.
Government expenditures rose to Bt76 billion in
December, compared to Bt7O billion in December
1997, a 8.6 percent increase. However, Bt9.6 billion
of this amou:ntwas interest payments on the recently
issued FIDF bonds. When excluding this payment, the
disbursement rate was only 6.0 percent, lower than
6.3 percent in the same period in 1997.
intention
to
stimulate
the
economy
through
additional expenditures of approximately Bt75 billion
(excluding interest cost of financial sector
restructuring) was announced as part of the 6 th Letter
of Intent released on December 1.
There are some important caveats concerning
the much needed fiscal stimulus: first, the additional
fiscal expenditures are likely to be financed through
loans from the World Bank, ADB, OECF and JEXIM
which will only become available once they are
approved and disbursed. Foreign
financed
expenditures are not included in the government
expenditure data that the Bank of Thailand publishes
on a monthly basis (Table 14). Most importantly,
-
experience has shown that delays in project
implementation tend to constrain rapid disbursement.
In short, Thailand's economy will not see any fiscal
stimulus until intemational donors (including the WB)
release their loan packages - and the additional
spending will not show up in the regular fiscal data.
The policy dilemma between exchange rate
stability and low interest rates has been resolved.
As a largely symbolic gesture, BOT cut its
discouint rate to an historic low on January' 29 to 7.0
percentfrom 12.5 percent. Very little lending is made
using BOT's interest rate and therefore the effects of
the reduction only signals the range in which BOT
hopes lending rates will settle in the medium term.
However, Thai Farmers Bank responded immediately
by announcing it would cut its minimum lending rate
by half-a-percentage point to 10 percent in midFebruary. The last adjustment to the discount rate was
in July 1997 when BOT raised the discount rate to
12.5 percent from 10.5 percent after floating the baht.
Iinterest rates continued to fall in Decenmber.
In December, liquidity conditions in the money5
market remained high, resulting in further declines in
money market rates (Figure 21). The minimum
lending rate (MLR) has also come down, albeit at a
slower rate. On February 18, the midpoint of the
range of MLRs offered by the six largest commercial
bankswas II percent.
7
Figureand
21:money marketurch
rates)
25 -
i5 -
t
''
---------
I dayRlP
\The
I.nth
i
_ _
WP
_
t
t
>
t
L-
.z
tS
o.
t
a
v
C:
a
<>
S
<
.:C
<
Cbanks
<>
10 In December, the monetary base stabilized at
the same level as December 1997. Narrow money
(MI) decreased by 1.1 year-on-year but increased
when compared to November. Broad money (M2)
increased by 9.0 percent year-on-year in line with the
expansion of commercial bank deposits, and credit to
the public sector.
Commercial bank credit is still contracting.
Commercial bank credit (including BIBF) declined by
9.6 percent year-on-year in December, folowing the
contraction in BIBF credits and as a result of debt
repayments and the continued caution in extending
loans.
Figure 22: Commercial hank real private credit
growth (incl. BIBF)
lo
-10
-is
v
t-
'
a
.
vX
t-
o
o
The spread benveen lending and deposit rates
narrowed further in December. The spread between
the minimum lending rate and a weighted deposit rate
has come down to 5.6 percent from more than 6.0
percent in November. Banks have been reluctant to
narrow the gap between lending and deposit rates,
since they have used the spread to cover the cost of
recapitalization rather than enterinig the government's
recapitalization scheme.
Bank of Thailand is holding talks with
local commercial banks to discuss whether they will
be able to further reduce the spreads of dzposit and
lending rates to 3-3.5 percentage points from the
current level of 5.6 percentage points. The central
bank is reviewing whether to scrap its requirement for
to maintain a 1 percent reserve for performing
loans in general.
-
11
-
Figure 25: Exchange rates
Figure 23: Spread between lending and deposit
rates
120
0
8-
Real
Nominal --------
.- -
106
2 J 30
...
52v
530
100
80
,.
60V2
0~~~~~~~~~~~
3
~~~~~~~~~~~~~~~50
2
20
0
60 t60
0
I
i
+
I
+
I
I
IC
++~~~~~~~~~~~<
!I
CD
Figure 26: Volatility
Figure 24: Real lending
,
7
C
ot
~~~~~~~~~~HKD
j
0.
~
-
-
11111
.
)0.5%
-- _
~~~~~0.0%
2
I.
rates
of forward
0
-,
-
ww
rate'
2.0%
5
w
00
0
O
00
Go
OD
o
0
~
0~~ ~~~~~~~
--|
1'
| Cj
4¢
oo
4
oo
0)
a
_
----I
a
a
a
<
a
<
0
c<
,
2
Source: Clarion Securities Asia
PERCEPTIONS OF THAILAND
The baht
in January.According
deprecites
to the large rating agencies,
Thailand
is
The Thai baht depreciated slightly against the
dollar in January. The average exchange in January
still below investment
to 36.2 in
was 36.6 to the US dollar, compared
December. On February 18, the baht was trading at
36.9 baht to the dollar (Figure 25). Increased volatility
of the spot anid forward rates in nmid-January indicates
has been somewhat
that the return of confidence
effect
of Brazil's
by the contagion
undermiined
devaluation.
Analysts expect thzat the lar-ge cr-edit ratitng
agencies will upgrade Thailand's credit ratings by
June 1999. Currently, Standard and Poor's quotes the
status..
sovereign long-term foreign currency rating at 'BBB
minus'. This is just above the threshold for investment
grade which many institutions and funds are obliged
Moody's
when
placing
investmients.
to respect
Investors Service gives Thailand a "Bal" rating which
is just below investment grade (Table I11). Thailand's
cost of borrowing on financial markets would benefit
from an upgrade by one or both agencies.
-
SOCIAI,IMPACTI
A global bond issue has been postponed until
key reform bills are passed. Despite the successful
launch for the Philippines sovereign bonds at the
beginning of January, Thailand will insist on the delay
of a global bond issuance pending the passage of 11
key economic reform bills and a lower rate on the
sovereiynn
country's~~~~~~~
~ ~ ~~
bonds.
country'ssovereign
Unemployment rose to 1,463,000 people in
roeoon,6300deoleI
people in August but
November 1998 from 1,138,000
tlhe interpretation of the number is difficult. There are
large seasonal fluctuations in the labor force in
Thailand which means that unemployment figures
from the Labor Force Survey have to be compared
with the same period in the previous year to become
meaningful. However, the newly released numbers are
from the first survey to be conducted in November
which makes it very difficult to assess whether the
increase is significant or simply a result of seasonal
fluctuations.
Thailand sailed through worries of contagion
effrects from the Brazilian devaluation without
problemes.Thailand's US-dollar sovereign bond due in
2007 rose briefly from 300 to 360 in the days after the
Brazilian devaluation but fell back quickly to 300.
Similar increases were experienced on sovereign
bonds issued by other countries in the region (Figure
27). On February 11, Thailand's sovereign bond was
trading at 255 basis points above an equivalent US
treasury. By comparison, Indonesia's and South
Korea's sovereign bond spread on February ]1I was
950 and 285. respectively.
The November survey estimated that there
were 1,463 thousand unemployed, or 4.5 percent of
the current labor force, compared with 1,138
thousand, or 3.4 percent of the current labor force in
August 1998. The number of underemployed
increased to 989 thousand in November from 938
thousand in August. In a recent NES.DB paper,
Kakwani and Pothong used only the February (dry)
and August (wet) surveys and seasonally adjusted the
Figure 27: International spreads9
C-THA
1400W-
IDHN
data (Figure 28). Their results show that in August
---------
1200
1200
reduced the
The recession has significantly
demand for labor
.s
Thailand
co.but in the sovereign bond market,
considered a low risk investment.
1600
12 -
- ---- ----PHL
/
1000
PHL
1998, the seasonally adjusted unemployment rose to
5.3 percent of the current labor force.
\
/
80(0
Il-eb
Figure 28: Seasonally adjusted
unemp]loyment
ratesl0
99
600
6
400)--\
~~~~~~~~~~~~
5
200
4-
r__
0
-y~~~~~~~~~~~
7
g;
<
2-
m
C
Z°a
-
3c
Source:Bloomberg
0m
Suc
Kka
mr
andPoth
ir
c
lC
ON
l998~
ONON
Soutrce:Kakwaniand Pothong,1998
r-_
X
ON
X
- 13 -
The main reason for the large fluctuations in
the labor market is that the agricultural sector is still
the main source of employment in Thailand. Within
the
agricultural sector, employment varies
substantially between the wet and dry seasons. For
example, the agricultural sector employed 11.6
million people in the dry season in 1998 but 16.5
million people in the wet season (36.1% and 49.4 % of
the total labor force, respectively),
The economic crisis has also led to large
drops in incomes avrage,pte cisi as led oa
drop in real incomes for people with all levels of
was
educaion. the
he
'Howver,
lage
education. However,
large dcreas
decrease was
experienced with people with elementary education or
less (Figure 29).
Figure 29: Impact of economic crisis on real
income per earner by education
O-5
t0l
x j-15 -
|
. l
llll
l ll
X
&'-'"0
Isquarter 1f
30 lEO
Irdst
quarter 1998
-35
<
-
a
c
a
w.
Performance of SET-listed non-flnancial firms
While showing some recovery from the
previous period, high degrees of leverage persisted in
the third quarter of 1998. Average debt-to-equity for
the 27 non-financial firms considered here fell from
2.8 to 2.5 between the second and third quarters of
Nearly three-fourths of all sectors
1998.11
experienced a reduction in debt-to-equity ratios.
Whrineasintsfgueddoc,teywe
Where
increases
generally
modest. in this figure did occur, they were
Debt-to-equity ratios of the largest sectors
tend to be higher than average. This is particularly
true of the building and property sectors which were
among the most highly leveraged sectors during 1998.
Figure 30 below shows debt-to-equity ratios for the
'key' SET non-financial sectors of property,
chemicals, building materials and supplies,
communications and energy. Key sectors are
identified as such based on a ranking of total sector
assets
- ;. lll
in the
> l third
l l quarter of 1998.12
cl
c0
i
c
-----6
The agricultural sector may be adversely
affected by Casevere water shortage in 1999. Officials
point out that water levels in irrigation dams are very
low, primarily because there was not the normal
recovery during the July-September period. This
occurred in part due to low rainfall and unusually high
releases during that period. In the next season, the
water shortage will bring the growing problem of
allocation and scarcity to the fore.
Communication
-
5
Property
ChemicaLs
>Building
D|
Mtls.
-A
Source:KakwaniandPothong,1998
The specter of a water shortage overshadows
agricultural production.
SE s
Figure 30: Debt-to-equity ratios of key nonfinancial SET sectors
8-
X
°a '
CORPORATE
SECTOR
Energy
-
All Sectors
4
-'
3-
0
-
o
-
a,
>
-
>
x
-
v
5,
-
5
a
For many sectors, leverage ratios peaked at
year-end 1997. Following the onset of the crisis,
significant increases in liabilities were met with
declining levels of equity. It is likely that much of the
increase in liabilities across the board was the result
of changes in the valuation of foreign debt due to the
Baht depreciation. Deterioration of equity, meanwhile,
has been more severe for some than others. The
-
14 Figure 32: Firms with insufficient interest
coverage and their associated liabilities
number of firms posting negative equity increased
sharply during the crisis, rising from only 7 at the first
half of 1997 to 41 in the third quarter of 1998 (Figure
3 1). At that time, the assets held by these negativeequity companies accounted for over 8% of the total
assets of all non-financial firms. These negative
equity associated assets were largely concentrated in
the building, property, and commerce sectors.
60%
Distressed Liabilities
*No.
-
160
140
of Distressed Firms
1
-
120
40%
30
'
o100
80
-
20%-U16
Figure 31: Non-financial SET firms with negative
equity
-fl40
1
10%
!Z 0%
120
-0
50~~~~~~~~~~0
9'
q
+-NO
Nee. EquityAsoc.Assets/'TA (it}
Firms
50
y
C>
45
-7,
y
r
y
y
y
el
_
40
lu
6ea
5>
/l
\$
/ |
|
L 35
|
|i
30
;/
.
co
co5 o'
crn
C
t
tc>
OC
The liabilities associated with these distressed
firms is considerable, accounting for 39% of the total
4
/
i25liabilities
of all firms in the data set.
The
-20 concentration of distressed liabilities is high, with the
majority being associated with key sectors. One-third
of distressed firms belong to the property arid building
materials sectors and together account for 45% of
distressed liabilities (Figure 33).
C?
Insufficient interest coverage continues to
present a problem for at least a third of all nonfinancial listed firms. During the year and a half
preceding the crisis, the number of 'distressed' firms
for whom cash flow falls short of interest expenses
more than quadrupled (Figure 32).4 As would be
expected, the circumstances of the crisis has placed
added strain on companies and interest coverage
(defined here as earnings before interest., taxes,
depreciation and amortization, or EBITDA, as a
proportion of interest expenses) has declined further
as a result. Almost across the board, increases in
interest expense have been accompanied by
reductions in profitability and cash flow. The average
ratio of EBITDA-to-interest expense dropped
drastically from 3.8 to 1.7 between the first and third
quarters of 1997. At the third quarter of 1998, the
average non-financial listed firm was only just able to
generate the cash flow necessary to service interest
expenses.
Figure 33: Distressed liabilities by sector
(Q3 1998)
Property
P
roperty
Sectors
36%
Building
Materials
6%
Communi-
cation
14%
ChemicaLs
6%
Progress
is
being
restructuring...
made
- 15 in
corporate
Progress is being made both in specific
restructuring transactions, and in developing a
framework conducive to more rapid progress.
The scope of the problem is becoming clearer.
The scope ol the problem is being more thoroughly
understood since the Bank of Thailand developed its
monitoring capabilities. The NPL problem in
Thailand (estimated at 2.5-2.8 trillion baht) can be
divided into large, medium and small cases.
At the
large end of the spectrum, there are roughly 300 large
NPLs which exceed 500 billion baht each,
representing roughly 1/4th of the NPL problem. The
average size in this set exceeds 2 billion baht per case.
The medium-sized set, with over 1,300 cases between
100 and 500 million baht per case, represents another
1/4th of total NPL. The smaller cases, under 100
million baht per case, represent roughly half of the
NPL, and is spread over tens of thousands of
corporate cases.
More larger restructuring transactions have
been completed in the first two moniths of 1999,
indicating the feasibility of a number of new forms of
restructuring for Thai corporates. One example
receiving attention was a large telecommunication
firm that reached a voluntary agreement with
creditors, involving over Bt2O billion of obligations
including international bondholders.
The first
court-supervised
reorganization
have taken place. Atphatec Electronics became the
first corporate to emerge from the formal
reorganization process introduced in the 1998
amendment
to
the Bankruptcy
Law.
Creditors
accepted a plan by which the assets of Alphatec will
be revived through a strategic investment by AIG and
Investor of Sweden.
... while ne2v measures
being considered.
to speed up the progress
While indications
of increasing
are evident, there scope of the problem
proactive
approaches.
The new measures
are
momentum
merits more
include:
Inter-creditor arbitration. Slow coordination
and decision-making by financial institutions have
been an obstacle to rapid progress in voluntary
restructuring. An agreement between Thai banks,
finance companies and foreign banks operating in
Thailand to adhere to streamlined inter-creditor voting
rules has developed rapidly. The most recent versions
of the agreement calls for signatories to adhere to a
75% approval threshold, arbitration for those cases
which do not reach 75% majorities, and some
incentives for corporate participation.
Facilitation
and
operational
support.
Following a successful roundtable with public and
private representatives involved in corporate
restructuring, the World Bank is seeking to assist in
the development of enhanced facilitation to support
the Bank of Thailand in corporate debt restructuring.
This would involve high-level Thai and foreign
restructuring experts acting as a communication
bridge between debtors and creditors, and a source of
more innovation and expertise. The World Bank,
through ASEM funding, is also proposing the
development of an advisory center to assist corporates
in developing restructuring plans.
Upgrading of CDRAC. CDRAC, the ad hoc
Corporate Debt Restructuring Advisory Committee
chaired by the Governor, was upgraded to full
Department status in the central bank. The Governor
is unhappy with the degree of progress achieved, and
the accountability of his staff toward achieving
progress. CDRAC will receive a pennanent staff of
up to 80, with a mandate including policy and
operations.
Progress in restructuring the 200 firms selected by the CDRAC
(BOT Estimate)
(billion baht)
In process
Completed
of negotiations
Restructuring
Sept Oct Nov June Sep Oct
Manufacturing
228266
287
2
6
10
Construction
14
20
20
1
3
Real estate
61
99
85
0
1
6
Exports
8
9
17
0
TOtael
438
569
596
1
8
17
Source: Bank of Thailand
Nov
32
3
15
2
30
PRIVATIZATION
ANDLEGALREFORM
Privatization
- 16 -
Water. The Master Plan proposed two
strategies for increasing private sector participation in
Bangkok's water utility, MWA, in order to improve
service quality and reduce the city's unaccounted for
Currently, 65 state-owned enterprises operate
in Thailand. In 1998, these enterprises had total
revenues of 884.2 billion baht ($US 24 billion) and
employed 336,648 people, just over 1% of the labor
force. Revenues of state enterprises accounted for a
significant
portion
of
economic
act:ivity-approximately apprximaely
14%
of
1997
GNP.
State-owned
4% o 197 GN. Stte-oned
enterprises operate primarily in four infrastructure
sectors-energy, telecommunications, transportation
and water-as well as in banking, services and
manufacturing.
Many of these activities are
generally considered to be outside core government
functions, and could be delivered through private
sector participation,
water (40% of total production). Options include a
long-term concession or corporatization and sale of
shares to a strategic partner. For the Provincial Water
Authority, serving the remainder of Thailand, it
proposed dividing the authority into several separate
regional water utilities, with private sector
participation
initiatedserve
on a case
by case
basis.
MWA
and PWA currently
as both
policy
maker
and
fliturer and
and
for theywayer s both
regulators for the water sector. In the future, with
increased private participation, it is expected that
these authorities will shed their policy making and
service provision functions and be transformed into
regulatory bodies for the sector. This process,
however, is still in the planning stages.
With the objectives of raising revenues and
improving efficiency, the government is undertaking a
program of divestiture of state enterprises. On
September 1, 1998, the Cabinet approved a Master
Plan for State Enterprise Reform. The Master Plan
lays out a comprehensive strategy and time table for
privatization in infrastructure, as well as for various
other state owned enterprises,
Transportation. Objectives for reform of this
sector-encompassing
land, air
and
water
transportation--are to reduce the role of the state and
enhance private sector participation. The Ministry of
Transportation and Communications is to bear
povicy.
y
f
tyatathe
pmatry rponsiblitses
Master Plan proposes that the provision of
transportation services will be predominantly the
responsibility of the private sector, with reforms
Energy. The Electricity Generating Authority
of Thailand (EGAT) is currently the main entity in
charge of electricity generation, transmission and sale
of bulk energy to distributors in Thailand. Private
sector participation in the sector will be encouraged
through independent and small power producers (IPPs
and SPPs). Seven IPPs have contracted to generate a
total of 5,944 megawatts of electricity for EGAT,
largely using natural gas, with some of these on line
as early as 1999.
separating regulatory functions from policy
responsibilities exercised by line government
agencies.
The Master Plan, in accordance withi policy
developed by NEPO, calls for introduction of full
competition in power generation to complement
existing independent power producers, with open
third party access to wheeling services, as well as
retail competition. Eventually, an independent system
office, owning no generation assets, will be
established to oversee transmission. Over the medium
term, the Electricity Generating Authority of Thailand
(EGAT) will be corporatized and restructured, with
individual power plants and subsidiaries sold.
are top priorities. The Master Plan has proposed for
SRT a separation of infrastructure, operations and real
estate assets, with private sector participation in
operations and real estate. Currently, an 'emergency
assessment' of SRT's financing needs is being
undertaken by an independent research institute under
the auspices of the Office of State Enterprises,
financed by EMAP.
Assistance, for which
contracting has begun, will follow in 1999 to begin
the division of infrastructure, operations and real
estate in preparation for incorporating private
participation where possible.
High contingent liabilities in transportation,
particularly for the State Railways of Thailand, make
financial restructuring an urgent necessity. In 1997,
SRT recorded a loss of 1.76 billion baht (US$48
rnillion), while receiving a government subsidy of 3.7
billion baht (US$ 100 million). Basic maintenance of
the railways, and improvement of the safety record,
- 17 -
Telecommunications. Two state enterprises
provide the bulk of telephone service in Thailand.
The Telephone Organization of Thailand (TOT)
provides domestic telecommunications services, while
the Communications Authority of Thailand (CAT)
provides intemational services, as well as telex and
post.
These enterprises have operational and
regulatory authority over telecommunications in their
respective areas, and are under the authority of the
Ministry of Transport and Communications (MOTC).
While CAT and TOT compete in some areas such as
cellular, paging, etc., they largely operate in exclusive
product markets.
In accordance with a commitment to the
World Trade Organization to fully liberalize its
telecommunications market to foreign competition in
2006, Thailand has begun to open the sector to private
competition. This strategy is put forth in the
Telecommunications Master Plan, approved by the
Cabinet in November 1997. The strategy is for a
phased approach in which the government will first
partially liberalize the market for domestic
competitors, followed by full liberalization.
According to the Telecommunications Master Plan,
the government intends to convert the concessions,
after which revenue sharing agreements will be
waived, and operators, including CAT and TOT, will
pay license fees to a newly established National
Communications Commission. Compensation from
concession conversions will be used to reduce service
fees.
The success of voluntary restructuring rests
on a strong legal framework for bankruptcy and
foreclosure.
Significant progress was made in
February on the government's legislative reform
program.
Act creating Specialized Bankruptcy Court.
Creates a specialized court, and limits the levels of
appeal for a bankruptcy case.
Creation of a
specialized court will speed processing and more
rapidly build judicial capacity. This has been passed
by both the House and the Senate. It only awaits
ratification by the House, before the Prime Minister
presents it to the King for his signature.
Act amending Bankruptcy law. The law
makes
several
important
corrections
and
improvements to the bankruptcy regime, including
voting by creditor classes, more clarity and security
for creditors who lend to insolvent companies to
enable business to continue, treatment of debtor
insiders, raises the minimum debt threshold to use the
law up to I million baht for corporations, clarifies
conversion of foreign currencies to Thai baht, specific
contents of rehabilitation plans, and contains
objective rules for treatment and confirmation of
plans, plan preparers and plan administrators (whereas
before these were largely at the discretion of the
Court). The changes stabilize the process and should
help creditors have more confidence in using it.
In order to facilitate privatization, legal
reform will be required, for example to corporatize
Code of Civil ProcecdulreAmendment - Petty
Cases.
Streamlines and speeds foreclosure
procedures for cases with a simply underlying
transaction or a small amount.
This may have a
substantial impact in restructuring, especially since
the majority of foreclosures are simple mortgages on
state
property, plant or equipment.
Legal reforn
owned
enterprises.
In
July
1998,
the
Government submitted a Corporatization Law to
Parliament. The Lower House has passed the law, and
the Senate is now considering it in its current session,
ending in March 1999.
Code of Civil Procedure Amendment on
Execution of Judgments.
Limits appeals once
judgement issued, thereby eliminating one of the
causes of the extremely long time between foreclosure
and collection as experienced in Thailand.
Code of Civil Procedure Amendment
enabling default judgements. This bill enables the
judge to issue a judgement for the plaintiff if the
defendant fails to appear to a summons. This closes
another of the delay tactics used by debtors to avoid
foreclosure.
-
ParliamentaryTimetable.
__
HOUSE
SENATE
2nd &3rd
1st
reading
2
Bankruptcy
1stReading
colmmittee
assed
Passed
Passed
Passed
Passed
In committee
'Cleared
_
to
concentration, ownership, size of institutions, types of
financial services offered, outreach (branch network),
etc. The government has recently appointed a
Financial Services Task Force which will identify
reforms needed to ensure that the financial sector is
safe, sound, and efficient in pricing and delivering
financial services
_
Vetting
Reading
court
Amendments
18 -
_
1/23
Bankruptcy
Bankruptcy
Law
Foreclosure:
Petty
:..
Passed
\.f
Passed
1/20
Current Developments
In committee
The next round of FRA sales will take place
on March 10, 1999. The FRA is now planning to
auction off the unsold portfolio around end-February,
Cases
Foreclosure:
executionof
Passed
judgement
7->e .asure:
Passed
2/10
In committee
-
1999.
second round, and that the assets will be r-epackaged
in two forms. Assets in which the private sector has
Onagenda
Summons
Iprocedures
It is widely expected that the Asset
Management Corporation (AMC) will take part in this
209-0
___________________
._______
shown
____
interest
will be packaged
in smaller
tranches.
Less desirable assets will be packaged in larger pools,
FINANCIALSECTOR
and will be sold according to a profit sharing scheme.
_____________
_-
It is also
expected
that
the
FRA
will
revise
and ease
Or ea yry hasome of the bidding conditions -- e.g. make non-cash
Overastthe year
by
necesity,
Tha
authorities have focussed on containing the financial
crisis and restoring public confidence.
While
substantial progress has been made on the resolution
of troubled financial institutions, as well as on
regulatory and supervisory improvements,
fi'ancial
restructuring is not yet finished and a resilient
financal
i not
et asured.participating
sytem
Bankrestuctringis
ovin slwly.The
process of mergers among intervened and other stateowned
inis'_
,'Lutions as part
of the August 14.
is .onPlan
track despite some elays
Restrucv.ukrng Plan iS on track despite some clelays.
r,
te
bn
s
71struc
Howevera provate bankspitain
schemes ak
advantage of the recapitalization schernes -particularly the Tier 1 scheme that requires banks to
write down their capital in return for official money.
The recent Thai Farmers Bank (TFB) preferred share
issue (see below) demonstrates that bank owners will
try to find solutions that avoid participatior -in the
government program. Only Siam Commercial Bank
(SCB) has applied for the Tier I program, although
Thai Military Bank (TMB) and Nakornthon Bank
(NTB) have recently expressed interest. SCB, TFB
and TMB also announced their intention to participate
in the Tier 2 scheme.
..
payments
acceptable
circumstances.
under
well-defined
TFB recently issued BtO billion in preferred
shares and subordinated debentures. The preferred
shares increase Tier I capital, enabling TFB to avoid
p
i
in
the
Government's
Tier
I
bank
recapitalization scheme, which would result in greater
dilution of the current owners. On its face, the
transaction contributes to bank
recapitalization
efforts. However, over half of the shares vere taken
up by TFB's depositors, who will earn a higher return
on their shares than on deposits, raising questions
about its real impact on the ability of TFB to
recognize its mounting losses.
Bangkok Bank (BBL) also raised Tier 1
capital through refinancing and capital gains. BBL
has raised Btl3.4 billion in new capital by refinancing
outstanding notes and debentures held by foreign
investors. The bank also announced capital gains of
Bt3.8 billion, achieved by adjusting the terms of its
$400 million in subordinated convertible bo.ds due in
2004. BBL was able to gain from the refinancing
because of the devaluation of the exchange rate since
the time of the original 1994 issue.
Financial sector restructuring requires a
medium-term perspectfive.
The
urgency of
mediu-termperspctive
Theurgeny
of the
he crisisNo-efrnglas(P)cntueo
crsis
row but are expected to peak in the first half of 1999.
has not allowed ongoing efforts to be based on a clear
According to the BOT, NPLs at local cofmercial
vision for the financial sector-in
terms of
-
banks accounted for more than 46 percent of total
loans in October 1998. Thailand's eight private banks
had loans more than three-months in arrears
amounting to 39.45 percent of their total loans, or
19 ASSESSMENT
There is light at the end of the tunnel
1.22 trillion baht. Eight state-owned banks had NPLs
Several of signs indicate that the bottom of
worth 58.3 percent of total loans, or 966.3 billion
baht. Foreign banks had NPLs of 8.05 percent.
the crisis mnay have been reached. First, production,
consumption and investment indicators have leveled
Updates on the reform program
out at a stable low level equilibrium which does not
seem to be deteriorating further. Second, Thailand's
Strenigthening supervisorv capacity. The
Bank of Thailand (BOT) is actively working to
strengthen its supervisory capacity. International
central bankers delivered training for examiners on
credit risk in early December and are assisting with
the developmnentof a school for bank examiners in the
BOT. In addition, the BOT is working on upgrading
prudential regulations and reviewing compliance with
the Basle "'Core Principles for Effective Banking
Supervision". The BOT is also arranging a Y2K
compliance examination course.
Banking Law Reformn. The BOT has been
working to strengthen the legal framework for the
supervision
of
commercial
banks
and
finance
companies, utilizing the lessons learned from the
financial sector crisis and incorporating best
international practices.
Dleposit Insurance
Svstem. The BOT has
finalized a framework for a Deposit Insurance
Agency, which will eventually replace the
unconditional guarantee now offered by the Financial
Fund.
However,
Institutions
Development
implementalion of the limited deposit insurance
scheme would occur when the financial system is
stabilized.
vulnerability to external shocks have been reduced
considerably by increasing reserves (both gross and
net), paying off short-term debt, and turning a large
current account deficit into a solid surplus. Third, in
contrast to a year ago, both monetary and fiscal policy
are now accommodating of growth. Interest rates have
fallen to pre-crisis levels without threatening the
stability of the baht or raising inflation, suggesting
that monetary policy can be even more expansionary.
Fiscal policy has also been geared to stimulate the
economy by allowing the deficit to grow to 5 percent
of GDP in the current fiscal year-- or 8 percent of
GDP when including the interest cost of financial
sector restructuring.
lmhereare also small signs of' recovery.
Within the manufacturing sector, the vehicles and
parts sector is now expanding rapidly on a year-onyear basis by increasingly servicing export markets
outside of the region. Domestic consumers may also
have regained some confidence, judging by a rising
trend in sales of cars and automobiles at the end of
1998.
...making the modest growth forecast of 0-1
percent highly likely...
Growth in the 0-1 percent range for 1999
seems a realistic scenario, given the low base the
economy is starting from and the positive trends
outlined above. Without any clear and present dangers
threatening to make consumer spend even less in
1999, or manufacturing finns produce at a level of
production lower than their current level
(corresponding to 1994-levels of production), the
economy is set to grow modestly without any major
domestic shocks-- provided the corporate debt
overhang can be restructured and the soundness of the
financial sector is not further undermined by rising
non-performing loans.
- 20 -
...but the challenge is now to put Thailand on the
track for the next decade of growth.
Modest growth in 1999 may be possible since
it is starting from a low base, but will be difficult to
sustain in subsequent years unless it is supported by
deeper structural reforms.
The prospects for a sustained recovery remain
clouded by the slow progress in dealing with the
underlying structural problems of the economy: rising
non-performing loans continue to undermine the
viability of the financial system, restructuring of the
huge corporate debt overhang has made little
headway, and the progress in privatization and public
sector reform has been very modest. The social impact
of the crisis has pushed numerous people below the
poverty line and threatens to erode social cohesion.
The external environment looks much less threatening
than it did in the summer of 1997. The risk premium
of Thailand's sovereign debt has been sharply reduced
and Thailand's economy was resilient enough to
weather the contagion effect of Brazil's currency
upheaval without serious consequences. Nonetheless,
the prospects for Thailand's recovery remain
intricately linked to the outlook for the depressed
regional market in Asia and the danger of a slowdown
in growth in the USA and Europe.
ConsensusForecastSummary
Average % Change on Previous Calendar Year,
unless otherwise noted
1997e 199Sf 1999f 2000f
Gross Domestic Product
Private Consumption
-0.4
0.1
-8.0
-11.4
0.7
0.5
3.3
3.9
Gross Fixed Investment
-16.0
-28.7
-1.3
4.9
-0.4
5.6
16.4
56.7
-11.6
8.1
9.0
52.8
1.1 4.9
3.0
3.8
9.8 12.3
55.0 57.2
4.0
-6.9
4.1
4.0
Growth rate (in volume terms)
Merchandise Imports (cif, US$bn)
9.2
61.3
8.8
40.8
45.0
47.7
Growth rate (in dollar terms)
Current account balance (US$bn)
-13.4
-11.8
-3.0
-33.5
-21.7
13.8
10.3
6.0
9.0
9.8
Manufacturing Production
Consumer Prices
Money Supply (End Year, % change)
Merchandise Exports (fob, US$bn)
Source: Forecast by Consensus Economics (February 1999), IMF,
and historical data from BOT
e = estimate, f = forecast
One of the biggest threats to sustained
recovery is to declare premature victory. There is a
risk that the incipient recovery generates a false sense
of complacency that could erode the Government's
resolve to tackle difficult structural reformns.In the
final analysis, Thailand's prospects of a quick and
sustained recovery depend on how resolutely
government addresses issues of financial and
corporate sector reform, how ably it manages the
social impact and how effectively it pursues structural
reformiis.
- 21 -
Annex Tables
Table 1: Macroeconomic framework
GDP at current market prices (billions of baht)
Real GDP growth (percent)
Consumption growth
Gross fixed investment growth
CPI inflation (average period, percent)
Savings and investment (percent of GDP)
Gross domestic investment
Private, incl. Stocks
Public
Gross national savings
Foreign savings
Balance of payments (billions of US$)
Exports, f.o.b.
Imports, c.i.f.
Current account balance
(percent of GDP)
Gross official reserves
Source:
Bank of Thailand,IMF, and staff calculations
1995
1996
1997
1998f
4189
4598
4827
4850
8.8
7.1
11.2
5.5
6.7
6.0
-0.4
0.1
-16.0
-8.0
-10.5
-30.4
5.8
5.9
5.6
8.1
41.6
32.7
8.9
33.3
-7.9
41.7
31.5
10.2
33.2
-7.9
35.0
23.5
11.5
32.6
-2.0
25.4
14.1
11.4
37.0
-12.0
55.7
24.8
14.2
70.4
56.7
4.0
7.3
61.3
-13.4
-10.4
-3.1
-7.9
52.8
-6.9
40.8
-33.5
16.1
-13.2
-7.9
54.7
-1.9
-4.5
70.8
0.6
-2.5
-14.4
-7.9
36.9
38.6
26.9
29.9
..
13.8
- 22 Table 2: Balance of Payments
(billionisof US$)
1996 1997
I. Current Account
A. Goods and services
a. Goods
Exports
Imports
b. Services (net)
Services receipts
Services payments
B. Income (net)
Income Receipts
Income Payments 1/
C. Current transfers
II. Capital and Financial Accounit
A. Capital account 2/
B. Financial account
1. Private
Bank
Non-bank
Direct investment
FDI 3/
Thai investment abroad
Others loans
Portfolio investment
Equity securities
Debt securities
Non-resident baht account
Trade credits
Others
2. Public
3. Monetary authorities 4/
III. Allocation of SDRs
IV. Errors and omissions
V. Overall balance
-14.4
-3.1
-11.7
-0.1
-16.1
-4.6
54.7
56.7
-70.8 -61.3
4.4
4.5
17.0
15.8
-12.6 -11.3
-3.4
-3.5
4.0
3.7
-7.4
-7.2
0.8
0.5
19.5
-9.1
0.0
0.0
19.5
-9.1
18.2
-8.1
5.0
-6.3
13.2
-1.8
1.5
3.2
2.3
3.6
-0.8
-0.4
5.5
-3.8
3.5
4.6
1.1
4.0
2.4
0.6
2.9
-5.8
-0.1
-0.2
0.0
0.2
1.:3
1.6
0.0
-2.6
0.0
0.0
-3.0
1.5
2.2 -10.6
1997
Qlp
Q2 P
Q3P
Q4 P
-2.1
-1.5
-3.2
13.6
-16.8
1.7
4.6
-3.0
-0.7
1.0
-1.7
0.1
2.4
-3.1
-1.9
-3.1
13.7
-16.8
1.2
4.4
-3.2
-1.3
1.0
-2.3
0.0
-3.9
-0.7
0.0
-0.9
14.5
-15.4
0.8
3.4
-2.6
-0.9
0.8
-1.7
0.2
-3.8
2.9
3.3
2.5
14.9
-12.4
0.8
3.4
-2.6
-0.6
0.9
-1.5
0.2
-3.7
2.4
1.8
2.4
-0.6
0.5
0.7
-0.1
-0.1
0.5
0.4
0.1
-1.7
0.3
-0.1
-0.1
0.8
0.0
-0.4
-0.1
-3.9
-0.9
0.0
-0.9
0.6
0.8
-0.2
-0.8
1.2
0.9
0.3
-1.8
-0.1
0.0
0.3
-3.4
0.0
1.1
-5.9
-3.8
-6.9
-5.9
-1.0
1.1
1.2
-0.1
-0.9
2.4
2.2
0.3
-4.0
0.0
0.2
0.6
2.5
0.0
2.1
-2.5
-3.7
-2.1
-2.8
0.7
0.9
1.0
0.0
-1.9
0.4
0.5
-0.1
1.6
-0.4
0.1
0.8
-2.4
0.0
-1.2
-2.1
1998
QIP
Q2P
Q3F
4.2
2.8
3.4
4.7
3.8
4.3
3.1
2.6
3.1
13.2 13.0
13.3
-10.1 -10.4 -10.1
1.6
1.2
1.1
3.3
3.1
3.0
-1.8
-1.9
-1.9
-0.6
-1.1
-0.9
0.9
0.8
0.8
-1.5
-1.8
-1.8
0.1
0.1
0.1
-2.6
-3.6
-2.0
-2.6
-4.3
-1.2
-3.1
1.3
1.3
0.0
-2.1
0.5
0.5
0.0
-3.0
-0.1
0.2
0.7
1.0
0.0
-0.8
0.8
-3.6
-2.2
-3.8
1.6
1.5
1.5
0.0
-1.1
0.1
0.0
0.2
1.3
-0.2
0.0
0.1
-1.5
0.0
-0.1
-0.9
-2.0
-3.1
-4.4
1.3
1.2
1.3
0.0
-0.7
0.0
-0.1
0.1
0.8
-0.2
0.2
0.7
0.5
0.0
-1.0
0.5
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. These items were previous, up to 1992, included in services and current transfers.
3/ Excluding $2.1 billion capital inflows used to recapitalize commercial banks. In some BOT tables, these
inflows are (correctly) categorized as FDI and in others (like this one), they are not.
4/ Including Bank of Thailand's borrowing and other oflfshoretransactions.
p = Preliminary
- 23 Table 3: Manufacturing Production
(% changes since previous year)
1998
Weight
Apr.
May
Jun.
Jul.
Aug. Sept.
Oct. Nov.
Dec.
1995
Manufacturing Production Index 1/
58.59 -16.1
-17.3 -12.3
-14.1
-10.4
-8.9
-2.6
-3.4
-1.8
Food
6.10 -18.4
-5.4
-0.2
1.0
1.4
5.6
6.6
14.0
1.6
Beverages
6.77
3.5
-10.5
-1.4
-0.8
-8.8
16.4
13.7
14.4
4.9
Cigarettes
1.90 -36.2
-39.9
5.0 -48.3
-21.5 -27.9
-9.1
39.8 -15.1
Construction materials
14.54 -42.9
-37.0
-46.3 -48.9
-37.5 -33.5
-30.6
-31.8
-15.0
Vehicles and equipment
7.39 -73.2
-67.0
-60.1 -57.4
-39.3 -40.7
-14.1
60.4
94.5
Petroleum products
3.68
2.3
-1.7
2.3
-0.9
0.4
-15.4
-0.2
-23.7
-9.6
Textiles
10.08
3.0
3:5
4.4
2.6
2.7
2.3
1.4
1.1
1.2
Others
8.13
-3.4 -11.2
-11.1
-14.1 -18.7
-13.0
-13.5 -22.3
-21.9
Source: Bank of Thailand (The Office of the Cane and Sugar Board, The Excise Department, Thailand Tobacco Monopoly, and
the manufacturers of respective products)
1/ From 34 items which account for 59 percent of the manufacturing sector.
Table 4: Key Private Investment Indicators
(% changes since previous year)
1998
Feb Mar Apr May
Jun
Jul Aug
Sep
Oct Nov
Private investimentindex
56.3 49.4 40.1 32.9 25.4 17.4 13.7
9.4
7.4
6.7
(% changes of 12-month MA)
-6.8
-8.9 -12.0 -14.4 -16.9 -19.6 -20.9 -22.3 -22.9 -23.2
Import value of capital goods (baht)
24.2
4.5 -17.8
-7.0
-0.8
-9.7 -15.0 -22.0 -23.6 -17.6
Import value of capital goods (US$)
-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 -41.1
Commercial banks'creditfor industry
33.5 13.5 11.1 10.5
9.9
0.6
-3.0
-6.3 -10.5
Commercial banks' creditfor construction
12.0
6.6 26.7
9.9 14.3 11.8 11.0
9.9
6.7
Note: Components of private investment index (in order of importance): 1) Import value of capital goods, 2) Domestic cement
consumption, 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 is
explained in (letails in the BOT's monthly publication "Key Economic Indicators.")
Table 5: Capacity Utilization
(percent)
Weight 1996
Ql
1997
Q2
Q3
Q4
Ql
1998
Q2
Q3
Q4
Ql
Q2 Oct. Nov. Dec.
Food
3.6 62.5 31.0 23.6 30.5 64.5 26.5 23.7 32.6 54.6 24.6 25.9 32.6 44.8
Beverages
5.7 81.8 87.2 88.9 107.6 68.1 83.9 81.8 89.3 61.6 69.9 90.3 88.5 93.8
Cigarettes
1.9 88.2 88.7 76.3 83.4 86.4 80.1 79.6 57.3 72.7 58.5 58.7 56.8 56.5
Construction materials
4.3 75.3 72.3 73.0 72.4 77.5 75.2 66.7 52.7 54.3 41.5 37.7 36.6 37.7
Others
11.6 73.0 70.3 49.6 72.0 64.2 65.4 67.5 67.9 60.4 58.2 54.7 51.6 50.8
Total
44.9 72.7 70.5 68.1 76.9 71.2 69.4 64.6 58.8 53.4 53.0 54.2 50.5 54.2
Note: Details of compiling the capacity utilization numbers can be found in "Monthly Bulletin (April 1998)" from BOT. Starting
with the October 1998 Monthly Bulleting, the capacity utilization numbers for 44.9 percent of the manufacturing sector are now
available on a monthly basis.
- 24 Table 6: Changes,in Consumer Prices
(year-on-year % changes)
All commodities
Foodandbeverages
Rice and cereal products
Meat, poultry and fish
Vegetables and fruits
Eggs and milk products
Other food bought from the market
Non-alcoholic beverages
Prepared food
Clothing
Men's and boys'
Women's and girls'
Cloth and sewing services
Housing and furnishing
Shelter
Furniture and equipment
Housekeeping and cleaning supplies
Household textiles
Electricity, fuel and water
Personal and medical care
Medical care
Personal care
Transportation and communication
Vehicles
Public transportation
Communication and equipment
Recreation and education
Recreation
Reading and education
Tobacco and alcoholic beverages
Non-food and beverages
1998
Mar
ALpr May
Jun
Jul Aug
Sep
Oct
Nov
Dec
Jan
9.5
11.6
46.7
3.9
5.4
9.7
9.6
8.3
9.1
8.9
9.5
8.2
9.0
5.4
2.5
7.0
3.8
9.4
15.2
7.2
6.4
8.1
10.7
12.2
14.0
0.0
7.7
6.3
8.5
19.7
8.2
10.1
12.1
41.6
4.1
10.8
12.0
9.6
8.6
9.0
9.0
9.8
8.2
8.6
6.0
2.5
7.3
5.6
9.3
18.2
7.9
6.2
9.7
10.7
10.7
15.8
8,.8
7.7
6.8
8.5
21.6
8.7
10.7
13.6
34.0
4.0
28.1
20.3
10.5
8.6
8.4
8.7
8.0
9.2
9.1
6.4
2.5
7.7
6.3
8.9
19.9
9.5
5.9
13.8
10.7
12.3
14.4
8.8
4.6
7.5
1.9
26.4
a
10.0
7.0
7.3
11.2
4.1
7.3
15.5
9.1
11.4
5.8
6.3
4.7
7.6
6.6
6.4
1.5
7.1
12.3
8.5
22.3
9.7
5.7
14.3
5.4
2.7
13.9
8.8
3.9
5.9
1.8
20.8
7.0
5.9
6.7
8.6
4.5
9.0
15.1
10.1
11.6
4.3
5.5
4.7
6.5
5.0
5.3
1.3
6.8
8.6
6.5
18.6
9.9
5.3
15.2
4.4
0.7
14.1
8.8
3.9
5.8
1.7
13.6
5.8
4.7
5.8
4.8
4.4
11.5
13.6
9.4
10.3
3.6
4.6
4.6
4.6
4.7
3.5
0.9
6.0
5.0
3.6
11.9
9.0
4.1
14.3
1.8
-2.1
11.9
8.8
3.2
5.3
1.1
10.4
4.1
4.3
6.0
1.2
6.4
13.6
12.1
11.0
10.0
3.6
4.2
3.9
4.3
4.9
2.9
0.7
5.4
4.0
3.1
10.5
7.8
3.2
13.3
-0.1
-5.0
12.2
8.8
3.2
5.2
1.2
10.1
3.3
3.5
10.2
13.1
37.9
4.2
21.2
15.2
9.8
9.0
8.9
8.1
8.1
8.0
8.9
6.1
2.4
7.4
6.2
9.8
19.0
8.7
6.3
11.3
10.9
12.9
13.2
8.8
5.2
6.8
3.5
23.1
11.8
27.0
4.4
21.0
20.3
10.7
9.4
7.5
9.1
8.1
10.1
9.5
6.6
2.5
8.0
9.9
9.0
20.2
10.2
6.0
15.2
10.6
12.2
14.4
8.8
4.6
7.5
1.8
26.6
94
7.6
7.4
15.3
3.6
1.5
18.3
9.5
11.8
6.5
8.4
7.3
9.6
8.7
6.9
2.1
7.6
11.9
9.1
22.9
9.2
5.1
14.0
8.3
8.0
13.8
8.8
4.3
6.5
1.7
22.5
_12
- 25 Table 7: Capital Flows to the Private Sector 1/
(millions of US$)
Bank
Commercial bank
of which recapitalization
BIBFs
Non-bank
Direct investment
Foreign direct investment
Thai direct invest. abroad
Others loans
Portfolio investment
Equity securities
Debt securities
Non-resident baht account
Trade credits
Others
Total
1997
Year
1998
Q1
Q2
Jun.
Jul.
Aug.
Sep.
1998
Oct. Jan-Oct
-6,569
-4,727
-1,472
623
837
-2,095
-3,055
1,273
1,287
-13
-2,110
487
491
-3
-2,850
-82
226
-4,527
-3,883
-1,756
1,148
-2,127
1,599
1,493
1,528
-35
-1,064
144
-27
170
1,245
-169
-49
-2,284
-2,523
-1,665
18
-858
383
441
451
-10
-301
100
40
60
262
-50
-70
-2,140
-1,966
-1,255
0
-711
943
377
387
-10
-20
-15
-60
45
596
-40
45
-1,022
-1,494
-497
0
-997
200
400
410
-10
-500
-70
-75
5
380
-60
50
-1,294
-911
-698
0
-213
99
437
447
-10
-213
69
60
10
-199
-60
65
-812
-2,042 -11,768
-909 -4,492
0
1,986
-1,134
-7,276
-346
-558
472
4,453
475
4,534
-3
-81
-396 -4,304
13
628
87
476
-75
152
-416 -1,244
-15
-425
-3
333
-2,388 -12,326
-1,842
-1,912
3,201
3,641
-440
-3,783
4,494
3,869
625
-5,839
-242
256
-8,481
Source: Bank of Thailand and own calculations
1/ Data is from BOT's Monthly Bulletin (November). converted into US dollars.
- 26 -
Table 8: Foreign Direct Investment by Sector (excl. FDI for recapitalization) 1/
(millions of US$) 2/
1996
1. Industry
1997p
1998
May P
Jun P
Jul P
Aug P
Sep P
Oct P Jan-Oct
707.9
1859.5
1.1 Food & sugar
45.1
222.2
83.6
1.8
282.5
26.8
102.9
3.5
151.5
2.0
206.8
5.4
438.0
6.6
1971.9
69.8
1.2 Textiles
49.2
47.6
3.1
14.9
3.5
46.2
28.6
0.5
85.5
1.3 Metal & non metallic
1.4 Electrical appliances
1.5 Machinery & transport
112.5
240.5
108.5
210.7
588.0
410.3
21.0
2.7
32.0
21.0
50.3
118.5
23.8
30.9
27.6
67.9
10.6
15.6
25.6
63.1
62.3
14.9
-14.1
227.8
330.0
214.8
684.5
1.6 Chemicals
1.7 Petroleum products
182.7
-249.8
193.0
14.4
19.0
0.0
43.1
-2.0
8.7
0.8
13.4
0.7
12.6
0.5
1.8 Construction materials
1.9 Others
2. Financial institutions 3/
3. Trade
4. Construction
5. Mining & quarrying
6. Agriculture
7. Services
8. Real estate
9. Others
Total
3.5
215.8
71.9
544.4
70.3
19.3
2.0
124.8
751.8
-24.8
2267.7
-12.6
185.9
118.7
1082.1
184.4
20.8
1.2
289.5
110.5
84.6
3751.4
2.6
1.4
4.4
132.0
63.5
7.5
0.0
13.2
2.6
14.9
321.7
0.0
9.7
8.5
88.7
9.8
-3.2
0.0
78.2
2.1
39.0
505.6
0.8
3.4
226.9
100.9
8.6
4.8
0.1
26.2
1.4
50.0
521.8
0.2
-5.2
16.0
56.7
16.7
10.1
0.0
16.1
0.5
155.7
423.4
0.0
8.8
11.6
-22.6
-8.7
-4.3
0.0
27.0
1.7
7.5
219.1
12.3
185.2
0.0
4.8
25.9
56.1
5.2
-10.5
0.0
8.6
2.5
-0.8
525.2
177.6
320.0
3.4
86.1
770.8
756.4
177.7
30.2
0.5
265.7
18.9
448.8
4441.0
I / 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 USS FDI reported
elsewhere (a yearly average of B/US$ 31.37 was used here).
3/ Revised.
P = preliminary
- 27 -
Table 9: Trade Indexes and Terms of Trade 1/
1995=100
Exports:
Exportunitvalue
Export value
Export volume 2/
Imports:
Importunitvalue
Import value
Import volume 2/
Terms of trade
1996 1996
Jan
Jun
Jul
Aug
Sep
111.1 109.4 110.4 111.1 111.6 111.4 110.9 110.7 110.8 111.1111.7 111.8 112.0
100.2 103.4 98.3 109.1 105.1 105.5 98.3 98.4 104.9 92.6 102.0 96.6 93.1
90.2 94.5 89.1 98.2 94.2 94.8 88.7 88.9 94.7 83.4 91.4 86.4 83.1
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
Feb Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
105.3 109.7 109.6 108.9 108.0 107.2 106.5 105.7 104.7 103.7 101.9 99.7 97.6
101.8 98.0 90.7 105.1 91.8 102.7 99.9 102.1 103.1 107.4 110.7 103.0 106.9
96.7 89.3 82.8 96.5 85.0 95.8 93.8 96.6 98.5 103.5 108.7 103.3 109.6
107.4 112.7 112.5 111.9 110.2 108.2 108.1 106.3 105.4 103.8 103.8 103.6 101.9
86.8 103.1 85.7 98.0 99.1 91.8 94.8 89.9 91.0 81.3 77.1 67.2 67.1
80.8 91.5 76.2 87.6 90.0 84.8 87.7 84.6 86.4 78.3 74.3 64.8 65.9
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
1998
Jan
Exports:
Export unit value
Export value
Export volume
Imports:
Import unit value
Import value
Import volume 2/
Terms of trade
Apr May
108.9 107.9 108.7 109.1 109.2 109.0 109.3 109.4 109.1 108.8 108.5 108.3 109.3
98.1 94.7 98.0 103.9 89.7 105.3 93.0 94.7 100.9 96.3 99.1 102.3 99.3
90.1 87.8 90.2 95.3 82.2 96.6 85.1 86.5 92.4 88.5 91.4 94.5 90.9
1997 1997
Jan
Exports:
Export unit value
Export value
Export volume
Imports:
Import unit value
Import value
Import volume 2/
Terms of trade
Feb Mar
(in terms of US$)
Oct Nov Dec
Feb Mar
Nov
Dec
90.8 89.6 89.9 90.7 90.7 89.1 88.7
90.5 96.7 98.2 91.0 96.3 96.7 94.3
99.7 107.9 109.2 100.4 106.1 108.6 106.4
96.9
Apr May
94.2 93.0 92.1 91.2
90.2 93.7 101.4 91.6
95.8 100.8 110.1 100.5
100.6 101.1102.0 102.4 101.2
56.6 54.7 61.2 60.4 55.3
56.3 54.2 60.0 59.0 54.7
93.6 92.0 90.2 89.0 89.7
Jun
98.6
60.8
61.6
90.9
Jul
97.4
61.2
62.8
92.3
Aug
Sep
94.7 93.5
56.2 55.0
59.3 58.9
95.7 97.0
Oct
94.1
58.0
61.6
94.7
94.8
57.0
60.1
93.5
59.4
Sotrce: Bank of Thailand
1/ FromJanuary1996onwards,base year was 1995(1995=100)and the indexesare calculatedusingthe Fisherchained
method.
2/ Volumeindexesare calculatedbased on the "factorreversaltest".
- 28 -
Table 10: Secondary Market Spreads
(basis points)
11/97 12/97 1/98
Thailand
445 476 452
China
96 121 147
Indonesia
274 469 629
Philippines 436 466 526
Source: Bloomberg
2/98 3/98 4/98
300 254 274
132 137 116
649 520 543
390 357 349
5/98
308
117
773
355
6/98 7/98 8/98 9/98 10/98 11/98 12/98 1/99 2/11/99
392 419 760 650 545 325 333 300
255
147 144 220 265 235 200 273 305
270
826 751 790 1430 1300 788 1050 1150
950
355 428 428 730 595 405 428 415
380
Table 1[1:Sovereign credit ratings
Foreign
Moody's
Bank Deposits
Foreign
China
A3 (stable)
Baa2 (stable)
BBB+
Hong Kong
A3 (stable)
A3 (stable)
A
Indonesia
B3
Ca
CCC+
South Korea
Bal
Caa]i
BB+
Malaysia
Baa3 (neg)
Bal (neg)
BBB
Philippines
Bal
Ba2
BB+
Thailand
Bal
BI
BBB
Source: Paribas, December 28, 1998 (Moody's and Standard & Poor)
Standard & Poor's
Local
Outloo
not rated
A+
BBBB+
ABBB+
A-
negative
negative
negative
stable
negative
negative
negative
Table 12: NPLs of Financial Insitutions
Thai banks
8 private banks
8 state-owned banks
Foreign branches of commercial
banks
Total banking system
Sep-98
past due loans
6-months 3-months
"lo
%
35.46
42.94
29.53
36.67
46.64
54.74
5.54
7.53
Oct-98
past due loans
6-months
3-months
%
%
mil. baht
37.85 46.02
2,188,168
31.79 39.45
1,221,798
49.17 58.30
966,370
5.91
8.05
64,775
31.05
37.72
33.23
40.53
2,252,943
Finance companies
24 private
12 intcrvened finance companies
48.75
42.7459.64
60.58
53.20
73.96
51.25
44.90
62.64
63.58
55.58
77.91
300,525
168,623
131,902
Total financial system
32.43
39.49
34.64
42.33
2,553,468
- 29 Table 13: External Debt 1/
(millionsof US$)
1996
1997
Q1
Q2
1998
Q3
Aug.
Oct.P
Nov.P
Total Debt Stocks (End of Period)
Public Sector
Govt and SOEs
Long-term
16,805
16,805
16,751
24,323
17,166
17.146
26,814
17,695
17,675
26,963
17,524
17,504
28,556
18,268
18,118
27,862
18,032
17,862
31,070
20,086
19.936
29,484
19,654
19,504
Short-term '
BOT (long term)
Use of IMF credit
Others
Private Sector
Long-term
Short-term
54
0
0
0
73,731
36,172
37,559
20
7,157
2,429
4,728
69,093
34,277
34,816
20
9,119
2,672
6,447
64,922
33,575
31,347
20
9,439
2,796
6,643
61,163
32,827
28,336
150
10,288
3,017
7,271
58,136
32,192
25,944
170
9,830
2,819
7,011
58,547
32,135
26,412
150
10,984
3,098
7,886
58,036
31,930
26,106
150
9,830
3,037
7,706
55,373
31,466
23,907
Commercial Bank
Long-term
Short-term
10,682
2,314
8,368
9,488
3,824
5.664
9,147
3,167
5,980
8,747
3,971
4,776
7,823
3,638
4,185
8,226
3,834
4,392
7,661
3,746
3.915
6,935
3,721
3,214
BIBF 2
Long-term
Short-term
Non-Bank 3
Long-term
Short-term
Total
Long-term
31,187
10,697
20,490
31,862
23,161
8,701
90,536
52,923
30.079
10,317
19,762
29,526
20,136
9,390
93,416
58,580
27,819
9,820
17,999
27,956
20,588
7.368
91,736
60.369
25.679
8,236
17.443
26,737
20.620
6,117
88,126
59,770
23,679
7,843
15,836
26,634
20,711
5.923
86,692
60,598
23,809
7,744
16,065
26,512
20,557
5,955
86,409
59,827
23,972
7,511
16.461
26.403
20,673
5,730
89,106
62,850
22,378
7,253
15,125
26,060
20,492
5,568
84,857
61,713
Short-term 1
Bank foreign assets
Gross official reserves
Debt Service P'ayments
Principal
Interest
Public sector
Private sector
Export of goods and services
Debt Service Itatio
37,613
7,362
38,725
9,024
3,822
5,202
1,845
7,179
73,497
12
34,836
8,887
26,968
11,630
6,072
5.558
1,959
9,671
74,431
16
31,367
8,744
27,680
3,218
1,894
1,324
514
2,704
16,833
19
28,356
11,201
26,572
3,017
1.673
1,344
496
2,521
16,291
19
26,094
12,564
27,291
4,027
2,664
1,363
656
3,371
16,624
24
26,582
13,730
26,679
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
26,256
13,542
28,482
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
24,057
12,801
28,891
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Source:Bank of Thailand
1/ 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 has
been 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 data
from IMF.
Notes: 1. The revised definition of private sector debt has been made since 1986. It consists of three parts, namely commercial
bank. BIBF and non-bank debt. 2. Total monetary authority debt includes the use of IMF credits and bilateral loans under IMF
package. Structural Adjustment Loans (SAL) of World Bank and Asian Development Bank under the same package, however,
are included in public sector debt. 3. Debt service payments in private sector has also been revised to include principal and
interest payments on BOT debt since 1986.
- 30
-
Table 14: Central Government Balance
(millionsof 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
34,118 -27,914
-2,739
-12,605 -33,100 -44,301
-23,323
-4.249
-20,528
-7,281
4,549
2.251
602
-10,682 -32,800 -51,582
-18,774
-1,998
-19,926
Budgetary deficit(-) or surplus(+)
Non-budgetary deficit! surplus(+)
Cash deficit(-) or surplus(+)
9,185
12,855
1,477
43,303 -:L5,059
-1,262
1,923
300
Financing:
Net domestic borrowings(+):
-
Bank of Thailand 1/
Commercial banks
-25,123 -16,380
1,539
-2,793
4,580
-1,747
-1,397
445
-553
-553
2,054
-5,800
1,546
-2,559
4,594
-1,695
-529
447
-21,320
-710
43
-163
-32
38
-584
-1
-
Government Savings Bank
-3,570
-8,200
0
0
0
0
-
-
-
Others
-2,287
-1,670
-50
-71
18
-90
-284
-1
-
-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
Net foreign borrowings (+)
Use of Treasury cash balances(+)
-14,515
91,177
134
13,850 28,545
54,481
20,442
- -100,000
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 carryover
expenditure from the previous two budgets. The overall balance is a cash balance, which is composed of the budgetary balance
and the non-budgetary balance. The non-budgetary balance, reported above the line, represents mainly changes in deposits of
government agencies at the Ministry of Finance which are of revenue-related and expenditure-related types.
Thailand Econiomic Monitor
- 31 Table 15: Budget Appropriations by Function
(millionsof baht)
FY 1998
FY 1999
General governmental services
General public services
Defense
Public order and safety
172,079
39,987
83,103
48,989
164,261
36,855
77,140
50,266
Community and social services
Education
Health
Social security and welfare
Housing and community amenity affairs
Religious, cultural and recr-eationial
affairs
357,022
206,945
64,071
34,048
39,538
12,421
348,848
208,614
60,180
36,636
35,105
8,315
Economic services
Fuel and energy
Agriculture, forestry and fishery
Mining and mineral resources,
manufacturing, and construction
Transportation and communication
Other economic services
215,517
2,004
63,284
4,167
196,257
2,482
61,288
4,715
115,953
30.110
92,852
34,920
85,382
115,633
830,000
825,000
Miscellaneous and unclassified items
Total
Source: Bureau of the Budget
- 32 -
Table 16: National Government Actual Revenue- Classified by Major Sources
(inillions of baht)
1997
Qi
Taxation
762,286
Income taxes:
276,365
Personal
111,682
Corporation
159,717
Petroleu
4,966
485,921
Indirect taxes:
Import duties
94,813
Export duties
14
Business tax
394
Value added tax 1/ 185,942
Selective sales tax 175,159
Fiscal monopolies
12,133
Royalties
6,471
Licenses & fees
2,808
Othertaxes
8,187
Sales and charges
8,710
State Enterprises
57,694
contribute & dividends
Miscellaneous revenue
19,006
and income
Total revenue
847,696
1/ Including specific - business tax
172,945
50,466
33,107
16,556
803
122,479
26,328
3
74
39,125
45,609
5,488
1,482
1,896
2,474
2,591
33,721
1997
Q2
Q3
Q4
Q1
1998
Q2
222,205 206,998
103,682
79,858
28,722
25,599
71,:240 53,816
3,720
443
118,523 127,140
24,682
24,121
3
3
66
167
41,416
50,045
46,334
45,934
2,134
3,112
1,495
1,551
239
308
2,154
1,899
1,i743
2,178
15,251
4,366
160,138
42,359
24,254
18,105
0
117,779
19,682
5
87
55,356
37,282
1,399
1,943
365
1,660
2,198
4,356
171,520
54,809
34,172
16,871
3,766
116,711
16,720
4
100
56,729
38,258
1,014
2,257
384
1,245
2,325
14,089
182,052
71,499
30,316
39,686
1,497
110,553
14,357
4
104
48,430
41,348
2,614
2,334
255
1,107
1,812
13,921
143,070
46,223
30,130
16,093
0
96,847
14,917
8
142
35,761
38,429
4,252
1,966
270
1,102
3,447
6,093
Q3
4,466
4,691
4,640
5,209
5,206
7,016
4,942
213,723
243,890
218,182
171,901
193,140
204,801
157,552
Thailand Econiomic Monitor
- 33 -
Table 17: Summary Table on Unemployment
(thousands)
Labor force status
Total
Total labor force
l.Current labor force
1.1 Employed
Underemployed (<20 hours/week)'
Feb-96 May-96 Aug-96
Total
Total
Total
Feb-97 Aug-97 Feb-98 May-98 Aug-98 Nov-98
Total
Total
Total
Total
Total
Total
1/
60,351 60,649 60,949 61,098 61,248 61,400
32,000 33,561 32,143 32,170 33,353 32,716
30,964 33,455 30,892 30,168 33,276 32,438
30,266 33,162 29,413 28,555 32,138 30,975
544
721
1,477
363
938
989
59,750
31,898
30,741
30,099
639
59,903
32,504
31,035
30,375
373
60,045
32,750
32,586
32,232
581
2.0
2.1
1.1
1.2
1.8
1.8
1.7
1.8
2.1
2.2
4.6
4.8
1.1
1.2
2.8
2.8
3.0
3.0
641
2.0
2.1
120
522
660
2.0
2.1
159
501
354
1.1
1.1
110
244
698
2.2
2.3
180
518
293
0.9
0.9
96
196
1,479
4.6
4.8
403
1,077
1,613
5.0
5.3
492
1,120
1,138
3.4
3.4
477
662
1,463
4.5
4.5
460
1,003
1,158
3.6
1,469
4.5
164
0.5
1,036
3.2
106
0.3
1,251
3.9
2,002
6.2
77
0.2
278
0.9
518
1,734
398
2,730
3,615
1,215
Unemployed + seasonally inactive labor
1,799
2,129
force
% of total labor force
5.6
6.5
1.6
5.4
1.2
8.5
11.2
3.6
Source: Labor Force Survey by National Statistical Office
1/ The May round was skipped in 1997.
2/ Line added by World Bank staff. Underemployment is (arbitrarily) defined here as those employed working less than 20
hours/week (see section on data issues).
1,741
% of totallaborforce
% of current laborforce
1.2 Unemployed
% of total laborforce
% of current laborforce
1) Looking for work
2) Available / not looking for work
2.Seasonally inactive labor force
% of total labor force
5.3
Thiailand Economic Monitor
- 34 -
Table 18: CDRAC-monitored Debt Restructuring Cases by Sector
(millionsof baht)
% of total
nurnber of
Total debts
Obligation Total
Credit
% of total
I irms
Agriculture, hunting and forestry
Fishery
Mineral and rock mining
Production
Electricity, gas and water distribution
Construction
Wholesale and retail
H 21and restaurant
Transport, warehouse and
communication
Financial brokering
Real estate, leasing and business
Health and social welfare service
Community, social and personal service
Total
0.6
0.3
0.8
48.2
0.6
5.9
11.6
3.7
5.4
860
335
6,721
343,279
5,893
20,972
21,890
13,158
34,011
2.3
18.4
1.7
0.6
100.0
4,061
72.185
5,438
1,407
530,210
860
335
7,107
429,594
6,417
29,863
24,429
13,176
57,328
0.1
0.0
1.1
63.7
1.0
4.4
3.6
2.0
8.5
44
4,105
21.953 94,138
61
5,499
72
1,479
144,120 674,330
0.6
14.0
0.8
0.2
100.0
386
86,315
524
8,891
2,539
18
23,317
Table 19: CDRAC-monitored Debt Restructuring Cases by Type of Creditor
(millionsof baht)
Type of creditor
Thai banks
Foreign banks
Finance companies (36 open)
Finance companies (56 closed)
Bangkok International Banking Facility (Thai)
Bangkok International Banking Facility
(foreign)
Representatives Office
IFCT and EXIM
Total
of which: Foreign
of which: Thai
Credit
outstanding
237,238
14,584
53,657
41,001
34,530
43,052
89,404
16,741
530,207
147,040
383,167
% of total
44.7
2.8
10.1
7.7
6.5
8.1
16.9
3.2
100.0
27.7
72.3
-
35 -
Table 20: Leverage and Profitability of Key SET Sectors (1994 to Q3 1998)
SECTOR
1994
1995
1996 Q1-97 Q2-97 Q3-97 1997 Q1-98 Q2-98 Q3-98
1.6
8.2
7.2
1.8
6.0
4.2
1.9
3.7
2.6
1.9
3.7
2.0
2.0
1.4
0.9
2.3
0.5
-0.3
2.7
0.3
-2.9
2.7
0.0
1.5
3.2
-0.4
-2.8
3.4
0.3
-1.9
1.0
7.0
7.9
1.3
6.3
9.6
1.9
3.5
5.6
2.0
3.1
5.8
2.1
3.3
6.0
3.8
1.2
3.5
9.2
2.0
0.8
4.8
1.4
13.3
6.0
0.9
3.2
3.5
1.2
7.3
1.6
4.8
5.9
1.7
3.6
3.2
2.0
3.0
0.4
2.2
3.7
-0.5
2.2
1.6
2.0
3.0
1.5
-2.2
3.7
1.9
-3.8
3.8
1.5
10.4
3.6
1.1
-6.4
3.3
0.8
1.5
1.1
3.8
3.4
1.3
4.9
4.9
1.7
3.5
2.7
1.8
3.5
3.7
1.9
1.6
2.9
3.1
0.3
0.5
4.2
1.4
-0.1
3.3
0.7
14.5
2.7
0.7
-4.0
2.4
1.2
13.3
1.2
6.5
6.2
1.3
3.7
6.5
1.5
3.6
6.1
1.5
2.8
5.4
1.1
6.0
8.5
2.2
1.9
6.0
2.6
3.7
5.7
2.3
3.6
20.5
2.9
1.8
7.1
2.4
2.4
7.0
1.4
6.2
8.6
1.6
4.3
5.5
1.8
3.4
3.8
1.9
3.8
3.2
2.0
2.0
3.4
2.7
1.7
1.4
3.1
1.7
-0.2
2.6
1.6
9.2
2.8
1.0
0.1
2.5
1.0
5.8
Properity
D/E
EBITDA/Interest Exp.
ROA (%)
Comuntnications
D/E
EBITDA/Interesl Exp.
ROA (%)
BuildingMaterials& Supplies
D/E
ROA (%)
Chemicals
D/E
ROk (%)
Energy
D/E
ROA (%)
All Non-FinancialSectors
D/E
ROA (%)
Source: Stock Exchange of Thailand, Merrill Lynch Phatra Securities (World Bank staff calculations)
- 36 -
Thailand at a glance
Thailand
East
Asia &
Pacific
Lowermiddleincome
60.6
2,800
169.7
1,753
970
1,707
2,285
1,230
2,818
1.2
1.3
1.4
POVERTY and SOCIAL
1997
Population, mid-year (millions)
GNP per capita (Atlas method, US$)
GNP (Atlas method, US$ billions)
9/8/96
Development
diamond*
Life expectancy
Average annual growth, 1991-97
Population (%)
Labor force (%)
1.5
1.32
1.3
Most recent estimate (latest year available, 1991-97)
Poverty (% of population below national poverty line)
Urban population (% of totalpopulation)
Life expectancy at birth (years)
Infant mortality (per 1,000 live births)
Child malnutrition (% of children under 5)
Access to safe water (% of population)
Illiteracy (% ofpopulation age 15+)
Gross primary enrollment (% ot school-age population)
Male
Female
13
21
69
33
32
69
38
16
84
17
115
118
116
..
81
6
87
..
..
GNP
per
capita
Gross
primary
enrollment
42
69
36
Access to safe water
84
19
111
116
113
Thailand
Lower-middle-income group
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1976
1986
1996
1997
GDP (US$ billions)
Gross domestic investment/GDP
Exports of goods and services/GDP
Gross domestic savings/GDP
Gross national savings/GDP
17.0
24.0
20.2
21.5
21.2
43.1
25.9
25.6
27.9
25.9
181.4
41.7
39.3
35.9
33.2
153.9
35.0
47.0
35.7
32.6
Current account balance/GDP
Interest payments/GDP
Total debt/GDP
Total debt service/exports
Present value of debt/GDP
Present value of debt/exports
-2.6
0.6
13.7
10.4
0.6
2.4
42.9
30.1
-2.0
2.0
..
..
..
..
-7.9
1.2
50.1
11.4
50.1
120.0
1976-86
1987-97
1996
1997
1998-02
6.0
3.7
8.9
8.7
7.2
13.5
5.5
4.0
-1.8
-0.4
-2.1
6.6
..
1976
1986
1996
1997
26.7
27.6
15.7
33.1
11.0
39.5
11.2
39.8
19.7
23.9
28.4
28.8
10
0
Services
45.7
51.3
49.5
48.9
.10-
Private consumption
General government consumption
Imports of goods and services
67.5
11.0
22.7
59.3
12.8
23.6
53.9
10.2
45.1
54.1
10.3
46.4
-20
1976-86
1987-97
1996
1997
Growthratesof exportsand importsI%)
Agriculture
Industry
Manufacturing
Services
3.8
7.1
6.2
6.3
3.4
11.2
11.3
8.2
3.8
7.0
6.9
4.6
1.2
-0.1
0.2
-1.1
Private consumption
General government consumption
Gross domestic investment
Gross national product
4.7
7.8
5.0
4.7
5.8
7.6
5.9
11.5
13.7
8.5
5.2
9.5
5.4
-0.9
5.0
0.0
-0.7
-19.0
-10.0
-1.1
E
Economicratios*
Trade
.o//s\\
omestic
Savings
Investment
Ise
.
..
Indebtedness
(average annual growth)
GDP
GNP per capita
Exports of goods and services
Thailand
Lower-middle-income group
-
..
STRUCTURE of the ECONOMY
(% of GDP)
Agriculture
Industry
Manufacturing
Growthratesof outputandinvestment
(°/.)
2
2
92
97
94
95
GDI
_
96
97
DP
(averageannualgrowth)
-
2520
1\
I0
5
o-0__,_-'
-5
_
92
93
94
95
96
07
-1l
Exports
Imports
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 will
be incomplete.
- 37 -
Thailand
PRICES and GOVERNMENT FINANCE
Domestic prnces
(% change)
Consumer prices
Implicit GDP deflator
1976
1986
1996
1997
4.1
4.5
1.8
1.7
5.8
4.0
5.6
5.4
Inflation(%)
B
Government finance
(% of GOP, includes current grants)
Current rev,erue
Current budget balance
Overall surplus/deficit
6
4
2
o -0
12.4
0.7
-3.6
15.0
-0.5
-4.5
18.9
8.5
2.2
..
(11S$millions)
1976
1986
1996
1997
Total exports (fob)
Rice
Rubber
Manufactures
Total imports (dl)
Totalimports(cif)
2,980
422
260
8.872
775
577
4,649
56,001
2,012
2,513
45,646
72,768
1 6
58,431
2.080
1,900
48,182
63,286
,6
-
93
94
i-
__
95
9e
97
GDPdeflator -- *OPI
_
TRADE
_
Food
..
..
.
Fuel and energy
Capital goods
..
1,660
1,225
..
6,248
34,222
Export price index (1995=100)
..
62
99
.1
Import price ndex(1995=100)
..
50
99
..
Terms
..
100)
70,000-
60.000
so,
124
100
r i
4000
30000
30,001'
1,36
,.
(1995=
Exportand importlevels (US$millions)
80,000 T
~~~~~~~~~~9,448
..
of trade
92
||
110I000l
5,536
31,367
0
93
92
94
lExports
95
9e
97
[lImports
..
BALANCE of PAYMENTS
1976
1986
1996
1997
3,467
3,900
-433
11,105
10,219
887
71,687
83,422
-11,735
72,740
72,673
67
Net income
-54
-864
-3,386
-3,576
Netcurrenttransfers
47
225
761
446
Currentaccountbalance
-440
247
-14,360
-3,063
Financing items (net)
Changes in net reserves
521
-81
436
-684
16,529
-2,169
13,712
-10,649
1.893
20.4
3.776
26.3
38.645
25.3
26.893
31.4
1976
1986
1996
1997
(USS millionsl
Exports of goods and services
Resource batlance
Currentaccountbalanceto GDP ratio (%)
0
|
91
92
93
94
95
96
97
-2
3
{
4t
|6
-7
-6
Memo:
Reserves includino aold (USS m(ilions)
Conversion rate (DEC. Iocal/US$)
EXTERNAL. DEBT and RESOURCE FLOWS
_.
|
(US$milliors)
Total debt outstanding and disbursed
IBRD
IDA
2,326
298
11
18,505
2,781
109
90,824
1,607
100
1,715
98
Total debt service
IBRD
IDA
378
36
0
3,655
358
1
8,652
318
3
257
3
Composition of net resource flows
Official grants
Official ceditors
Private creditors
Foreign direct investment
Portfolio equity
84
109
139
79
0
152
294
-505
263
31
96
634
9,630
2.336
1,551
..
..
..
World Bank program
Commitrnents
Disbursements
Principal repayments
Net flows
Interest payments
Net transfers
158
50
15
35
22
13
93
206
129
77
230
-154
250
767
443
155
288
105
184
World Bank
|
Compositionof total debt, 1996 (US$millions)
138
198
-60
122
-183
B 100
A: 1607
D: 1,278
E:7,623
..
//
|
37/613
/l
G37,613/
/
|
|
F:42,603
A - IBRD
B - IDA
C-IMF
E- Bilateral
D - Othermultilateral
F - Private
G- Short-term
9/8/98
SOURCES
*
Data
on investment, manufacturing, expenditure,
balance of payments, monetary variables. and trade ar-.
*
*
*
*
balance
monetaryvariables,anThailand
of payments,
from the Bank of Thailand's (BOT) web page (monthly
statistical update, Key Economic Indicators, Databank,
all available at http://www.bot.or.th.) Other sources of
data include: Clarion Capital Asia: AsiaClock
Unemployment data in Thailand come from different
sources, including (i) the national Labor Force Survey
(LFS) which is conducted by the National Statistical
Office (NSO) three times a year, (ii) the number of
persons complaining about not getting severance
payments after being laid off reported by the Ministry
of Labor and Social Welfare (MoLSW), (iii) national
censuses (three so far) conducted by the Departmenetof
Local Administration (DOLA), and (iv) NESDEB
estimates of the number of new graduates entering the
labor force. We consider the Labor Force Survey the
most reliable source and have chosen to focus on those
numbers (BOT publishes the numbers on their website).
Data on tourism is from the Bangkok Post, Jones Lang
Wotton
and
Travel
Impact
Newswire
([email protected])
Real estate data is provided by Jones Lang Wootton
(http://wwwjlwthai.com/) in their monthly newsletter
"Insight."
The "Thailand at a Glance" tables are generated from
the World Bank's "live data base." Some of the
numbers may differ from BOT tables because of
differences in definitions and the use of different
exchange rates to convert baht numbers into US dollars.
LINKS
*
*
*
*
*
*
*
Other Web sites on Thailand worth visiting:
BOT's
Economic
Research
Department:
www.bot.or.th/research/public/econpage.htm
Privatization Masterplan: www.mof.go.th/SEPC/
Fiscal data: www.mof.go.th/fiscal/
Board of Investment: www.boi.go.th/
Social Sector Program Loan: http://www.sspl.org/
National Statistical Office (for employment data):
http://www.nso.go.th/ O
Thai*
Rating
and
nfor
wwwhaisRatinetcoathr
www.tns.trnet.co.th/
Stock Exchange of Thailand: www.set.or.th
*Customs data: http://www.customs.go.th/ (the Customs
Department's web site contains a data base with volume
and baht value numbers for all export and import
commodities.)
-
38 DATAISSUES
Unemployment. There is
no cDnsensus in
on which data source is more accurate and which
i.
tio
unemployment
should be used.Fr exmpe
the unemployment rate varies greatly whether it is
calculated as a percentage of the current labor force (that is,
excluding the seasonally inactive labor force) or as a
percentage of the total labor force. More importantly,
should seasonally inactive workers be counted as
unemployed or not? The seasonal impact on emnploymentis
highly significant in Thailand.
The performance of Thailand's factories and retailers will
be more easy to monitor in the near future. The Ministry of
Industry is taking over the task of assembling the
manufacturing production index from the BOT and they will
supplement the index with indexes measuring labor capacity
and sales orders. A manufacturing inventory index will be
assembled to measure the capability of manufacturers to sell
their products and their level of inventories. MOI will begin
publishing these figures by July 1999.
2 The largest export commlioditywithinl"vehicles and parts"
is "vans and pickup trucks" (approximately 40% of total
vehicles and parts). In volume terms, this category has been
expanding by 82 percent from July 1997 to December 1998.
Exports are increasingly moving towards the EU, Australia
and new markets such as South America and the Caribbean.
3 These numbers are taken from an unpublished hand-out
from the BOT s monthly discussion on recent economic
developments. Our own calculations based on BOT's
monthlv bulletin (converted into US$), reveals slightly
smaller numbers and are the basis of Table 7.
For example, the end of 1997 amount of fore:ignassets of
commercial banks is anywhere between S6.3 billion (BOT
online databank table 5.7) and $10.3 billion (BOT Monthly
bulletin, October 1998). The monthly bulletin for November
1998 revised the number once more and now foreign assets
of commercial banks (end of 1997) was $8.9 billion
according to the debt table (table 45) but $10.0 billion
according to the table showing assets of liabilities of
commercial banks (table 7).
Short-term external debt is defined as debt that has an
original matunity of one year or less.
6 In the IMF program, net international reserves is defined
as gross reserves minus forward/swap obligations minus
IMF borrowing (currently at $3.1 billion of th.- $4 billion
has been disbursed).
7 BOT doesn't publish disbursements under the financing
package as a separate capital inflow under "monetary
authorities" (BOT Monthly Bulletin, table 42). The large
balance of payments support capital inflows are concealed
in the BOP category "Monetary authority" because at the
same time, BOT recorded large capital outflows to unwind
Thailand EconomicMonitor
forward/swap obligations. The only way to get an estimate
of the amount of disbursements is to look at increases in the
monetary authorities' stock of external debt. The numbers
presented in the figure 20 are meant to give an idea of the
size of borrowed reserves.
8 The midpoint of the range of the minimum lending rate
(MLR), as offered by the four largest commercial bank and
deflated by CPI.
9 For Thailand, the graph is measuring Thailand's sovereign
bond coupon of 7 3/4 percent maturing on 04/15/07
spread's above equivalent US Treasuries.
10"Dry" and "wet" refers to the results of the Labor Force
Survey conducted in February and August, respectively. In
Kakwani/Pothong's paper, the results of the May LFS are
not included, probably because the May survey wasn't
conducted in May 1997.
1 The data set employed in this analysis consists of
approximately 360 non-financial SET-listed firms
categorized into 27 sectors. Debt-to-equity ratios were
calculated as aggregated liabilities / aggregated equity.
12 Sectors 'other' and 'transportation' also rank among the
largest using this criteria of total sector assets, although in
each case this is due to the dominance of a single firm (Siam
Cement Company and Thai Airways, respectively). Thus,
these two are not identified as 'key' sectors here. Ranking
by assets is based on information available.
13 Calculation of debt-to-equity ratios here excludes firms
posting negative equity. While this may not seem desirable,
the inclusion of these companies creates an upward bias,
particularly for post-July 1997 time periods.
14 EBITDA figures provided by Merrill Lynch Phatra
Securities Company Limited. Due to limitations on the
availability of data, interest coverage analysis covers a
subset 278 finns.
- 39 -
U
THEWORLDBANK
ThailandOffice
Dietheim Towers
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