Vatchara Charoonsantikul and Thanong Khanthong say Finance Minister Tarrin Nimmanahaeminda might have a tough time dismounting from the tiger's back.

Finance Minister Tarrin Nimmanahaeminda's enormous task is to bulldoze Thailand out of the vicious economic cycle otherwise he will be eaten alive politically. At present reading, the odds against his dismounting from the tiger's back unharmed and a hero are 50:50.

After releasing to the public the fourth economic structural adjustment programme with the International Monetary Fund, Tarrin admitted Tuesday that economic recovery is not yet within sight. The economy will face a negative growth rate of 4 to 5.5 per cent and an inflation rate of 10.5 per cent this year, and Tarrin would not make a forecast as to when he believes the pick-up will come around.

Back-to-back quarterly projections show the Thai economy suffering from a negative growth of 7.8 per cent in the first quarter, 8.3 per cent in the second quarter, 3.7 per cent in the third quarter and 0 per cent in the final quarter of this year. These figures are provided by the Bank of Thailand, which are slightly different from Tarrin's.

Tarrin is staking his political future on economic recovery, a gamble that can go either way. Looking around, other students of the IMF are no better off than Thailand. Indonesia is falling apart because of political and social upheaval. The economy there is likely to contract by 9 per cent, with inflation running at 50 per cent. South Korea is also facing a negative growth rate in the first quarter of this year for the first time in 18 years, contracting by about 3.8 per cent.

Thailand is facing a classic vicious economic cycle, characterised by a weak economy, rising bad debts in the banking system, a credit crunch, and high interest rates to keep the currency stable. Since bad debts in the banking system are expected to hit 40 per cent this year, this means that banks will earn about 3 to 4 per cent in profit margins on the remaining 60 per cent of their assets. Earnings won't cover the 40 per cent in non-performing assets, forcing the banks to set aside higher provisions and recapitalise.

Except for Thai Farmers Bank and Bangkok Bank, efforts by other banks to recapitalise appear to be faltering. The Thai banking system needs to recapitalise by at least another Bt800-Bt900 billion as projected by Standard & Poor's. Only foreigners have the money to participate in the recapitalisation of Thai banks.

The faltering recapitalisation is causing a credit crunch, which adversely affects exporters, consumption demand and investment demand. This breeds further bad debts for the banks, which will have to raise even more capital if they want to continue to lend. If this vicious cycle is not ended, Thai Farmers Bank's and Bangkok Bank's capital increase won't be enough.

At this point, Tarrin's focus is still on stabilising the economy, although he needs to adopt a more expansionary fiscal programme to relieve the plight of the poor. The Chuan administration has so far been criticised for being obsessed with tackling the financial crisis at the expense of the poor, who have had nothing to do with the economic collapse.

Indeed, Tarrin has been constantly stressing the need to look after the low-income group, who are facing growing unemployment and a higher cost of living. The social programmes, attached to the IMF package and designed to create jobs for low-income earners, were buried in the heat of the political squabbles.

Tarrin is walking a tightrope and he must make sure that the government is not insensitive to the plight of the poor otherwise popular unrest will risk tearing the IMF support programme apart. The spending deficit to the tune of Bt25 billion on top of the 1999 fiscal budget of Bt800 billion will be aimed at creating jobs in the rural sector and keeping the rural folk from returning to Bangkok and other big cities.

This important element of the fiscal budget, when combined with the Bt21 billion external aid from the World Bank, the Overseas Economic and Cooperation Fund and other organisations, should help the government to muddle through the stormy politics if the money is spent effectively.

Still, Tarrin is sticking to fiscal and monetary prudence, committing himself to following a rigid structural adjustment programme that will only bear fruit in the event of a return of private capital.