Pre-crisis level still a year off

ALTHOUGH the Thai economic recovery is on track, with a growth rate of 5 per cent in 2000, it will probably take a year more before it climbs back to its pre-crisis level.

Assume the pre-crisis year 1996 had a base rate of 100. Since the Thai economy declined by about 2 per cent in 1997, the 1997 base rate would be 98. In 1998, the economy contracted further

by 10 per cent, or 9.8 from 98. This would give 1998 a base rate of 88.2.

It was not until 1999 that the Thai economy began to grow again, this time by 4 per cent. This growth was equivalent to 3.53 on the previous year's base rate of 88.2, which would give 1999 a base rate of 91.73.

Given the International Monetary Fund's projection of the Thai growth rate this year of 5 per cent, this is equivalent to an increase of about 4.59 on the base rate of 91.73 in 1999. So, this year

the base rate is likely to be about 96.32.

If the Thai economy manages to grow at about 5 per cent again in 2001, the wealth of Thailand is likely to return to its pre-crisis level. However, it also means that the economic crisis wasted

the country's opportunity for growth and prosperity by four full years.

The World Bank has come up with a similar projection to the IMF on the nation's economic growth rate, predicting that the Thai economy will expand by 4 per cent to 5 per cent this year. The National Economic and Social Development Board, meanwhile, has forecast economic growth of about 4.4 per cent.

Tarrin Nimmanahaeminda, the finance minister, said the government would be focusing on four important areas in its attempt to maintain momentum in the economic recovery.

First, non-performing loans in the banking system would have to come down quicker and the financial sector reform would have to proceed further so that the banks could resume lending.

Second, the economic and business environment would have to be more conducive to private investment, to help relieve the burden from government spending. This, Tarrin said, would lead to new jobs and new investments.

Third, efforts would have to be made on shoring up the price of agricultural products. Farm prices are expected to fall this year, but Tarrin said if talks on agricultural liberalisation were successful, it would improve prices.

Fourth, the government would be monitoring the global economic situation closely. The question is whether the US economy continues to expand, or whether the stock market has a sharp correction, which might have global implications.

Tarrin also said he would meet representatives from Moody's Investors Service, the US credit rating agency, to discuss aspects of Thailand's economic resurgence.

He did not believe political instability in Thailand would become a problem, saying the country's credit rating would improve if the economy recovered.

BY THANONG KHANTHONG