tns 12564
Transcription
tns 12564
Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 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 skoeberle@worldbank.org lsondergaard@worldbank.org 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. Thailand Economic Monitor - 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. Thailand Economic Monitor - 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 $12.8 billion.4 Ii 15 107 | > -5 | * Figure 15: Private and public capital flows 3 2 4 _ * Private Public i L[ { Dl ~~~ ~ i ~~~~~~~~~~~~~~~~-2 -6C *i*l-7 outflows -8 92 93 94 95 96 97 98e 99fc c - Thailand Economic Monitor - 8- Figure 16: Long- and short term external debt' Figure 18: FDI by country (excl. US$ 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 - Thailand Economic Monitor -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, Thailand Economic Monitor - 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. Thailand Economic Monitor - 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. Thailand Economic Monitor - 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 Thailand Economic Monitor - 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 Thailand Economic Monitor - 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% Thailand Economic Monitor 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 Thailand Economic Monitor 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, Thailand Economic Monitor - 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. Thailand Economic Monitor - 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 Thailand Economic Monitor - 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. Thailand Economic Monitor - 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) Growth rate (in volume 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) Growth rate (in dollar terms) 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. Thailand Economic Monitor - 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$) Exports, f.o.b. Growth rate (in dollar terms) Growth rate (in volume terms) Imports, c.i.f. Growth rate (in dollar terms) Growth rate (in volume terms) Current account balance (percent of GDP) Gross official reserves Source: Bank of Thailand,IMF, and staff calculations 1995 1996 1997 1998f 4189 4598 4827 4850 8.8 7.1 11.2 5.5 6.7 6.0 -0.4 0.1 -16.0 -8.0 -10.5 -30.4 5.8 5.9 5.6 8.1 41.6 32.7 8.9 33.3 -7.9 41.7 31.5 10.2 33.2 -7.9 35.0 23.5 11.5 32.6 -2.0 25.4 14.1 11.4 37.0 -12.0 55.7 24.8 14.2 70.4 56.7 4.0 7.3 61.3 -13.4 -10.4 -3.1 -7.9 52.8 -6.9 40.8 -33.5 16.1 -13.2 -7.9 54.7 -1.9 -4.5 70.8 0.6 -2.5 -14.4 -7.9 36.9 38.6 26.9 29.9 .. 13.8 Thailand Economic Monitor - 22 Table 2: Balance of Payments (billionisof US$) 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 Source: Bank of Thailand Remarks: Other sectors (including state enterprise) 1/ Investment income only 2/ Comprise debt forgiveness, migrants' transfers, acquisition/ disposal of non-produced, non-financial assets, etc. These items were previous, up to 1992, included in services and current transfers. 3/ Excluding $2.1 billion capital inflows used to recapitalize commercial banks. In some BOT tables, these inflows are (correctly) categorized as FDI and in others (like this one), they are not. 4/ Including Bank of Thailand's borrowing and other oflfshoretransactions. p = Preliminary Thailand Economic Monitor - 23 Table 3: Manufacturing Production (% changes since previous year) 1998 Weight Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. 1995 Manufacturing Production Index 1/ 58.59 -16.1 -17.3 -12.3 -14.1 -10.4 -8.9 -2.6 -3.4 -1.8 Food 6.10 -18.4 -5.4 -0.2 1.0 1.4 5.6 6.6 14.0 1.6 Beverages 6.77 3.5 -10.5 -1.4 -0.8 -8.8 16.4 13.7 14.4 4.9 Cigarettes 1.90 -36.2 -39.9 5.0 -48.3 -21.5 -27.9 -9.1 39.8 -15.1 Construction materials 14.54 -42.9 -37.0 -46.3 -48.9 -37.5 -33.5 -30.6 -31.8 -15.0 Vehicles and equipment 7.39 -73.2 -67.0 -60.1 -57.4 -39.3 -40.7 -14.1 60.4 94.5 Petroleum products 3.68 2.3 -1.7 2.3 -0.9 0.4 -15.4 -0.2 -23.7 -9.6 Textiles 10.08 3.0 3:5 4.4 2.6 2.7 2.3 1.4 1.1 1.2 Others 8.13 -3.4 -11.2 -11.1 -14.1 -18.7 -13.0 -13.5 -22.3 -21.9 Source: Bank of Thailand (The Office of the Cane and Sugar Board, The Excise Department, Thailand Tobacco Monopoly, and the manufacturers of respective products) 1/ From 34 items which account for 59 percent of the manufacturing sector. Table 4: Key Private Investment Indicators (% changes since previous year) 1998 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Private investimentindex 56.3 49.4 40.1 32.9 25.4 17.4 13.7 9.4 7.4 6.7 (% changes of 12-month MA) -6.8 -8.9 -12.0 -14.4 -16.9 -19.6 -20.9 -22.3 -22.9 -23.2 Import value of capital goods (baht) 24.2 4.5 -17.8 -7.0 -0.8 -9.7 -15.0 -22.0 -23.6 -17.6 Import value of capital goods (US$) -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 Source: Bank of Thailand 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 Source: Bank of Thailand 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. Thailand Economic Monitor - 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 Source: Bank of Thailand 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 Thailand Economic Monitor - 25 Table 7: Capital Flows to the Private Sector 1/ (millions of US$) Bank Commercial bank of which recapitalization BIBFs Non-bank Direct investment Foreign direct investment Thai direct invest. abroad Others loans Portfolio investment Equity securities Debt securities Non-resident baht account Trade credits Others Total 1997 Year 1998 Q1 Q2 Jun. Jul. Aug. Sep. 1998 Oct. Jan-Oct -6,569 -4,727 -1,472 623 837 -2,095 -3,055 1,273 1,287 -13 -2,110 487 491 -3 -2,850 -82 226 -4,527 -3,883 -1,756 1,148 -2,127 1,599 1,493 1,528 -35 -1,064 144 -27 170 1,245 -169 -49 -2,284 -2,523 -1,665 18 -858 383 441 451 -10 -301 100 40 60 262 -50 -70 -2,140 -1,966 -1,255 0 -711 943 377 387 -10 -20 -15 -60 45 596 -40 45 -1,022 -1,494 -497 0 -997 200 400 410 -10 -500 -70 -75 5 380 -60 50 -1,294 -911 -698 0 -213 99 437 447 -10 -213 69 60 10 -199 -60 65 -812 -2,042 -11,768 -909 -4,492 0 1,986 -1,134 -7,276 -346 -558 472 4,453 475 4,534 -3 -81 -396 -4,304 13 628 87 476 -75 152 -416 -1,244 -15 -425 -3 333 -2,388 -12,326 -1,842 -1,912 3,201 3,641 -440 -3,783 4,494 3,869 625 -5,839 -242 256 -8,481 Source: Bank of Thailand and own calculations 1/ Data is from BOT's Monthly Bulletin (November). converted into US dollars. Thailand Economic Monitor - 26 - Table 8: Foreign Direct Investment by Sector (excl. FDI for recapitalization) 1/ (millions of US$) 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 Source: Bank of Thailand 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 Thailand Economic Monitor - 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". Thailand Economic Monitor - 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 Source: Bank of Thailand 32.43 39.49 34.64 42.33 2,553,468 Thailand Economic Monitor - 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. Thailand Economic Monitor - 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 Thailand Economic Monitor - 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 Source: Bank of Thailand 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 Source: Bank of Thailand 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 Source: Bank of Thailand 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 Thailand Economic Monitor - 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 EBITDA/Interest Exp. ROA (%) Chemicals D/E EBITDA/Interest Exp. ROk (%) Energy D/E EBITDA/Interest Exp. ROA (%) All Non-FinancialSectors D/E EBITDA/Interest Exp. ROA (%) Source: Stock Exchange of Thailand, Merrill Lynch Phatra Securities (World Bank staff calculations) Thailand Economic Monitor - 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 Imports of goods and services 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. Thailand Economic Monitor - 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 Imports 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 Thailand Economic Monitor 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 (imtiaz@loxinfo.co.th) 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 14th Floor TowerA 93/1 Wireless Road PRODUCED BY DESIGII 0 COPY M PRN- Bangkok10330. Thailand IphougrOphiGs Tel. (662) 256-7792 Printshops Of The Future Fax (662) 256-7794-5 Tel. 726-2555. 726-2828 Ext. 3280-5