Baht/economic crisis
Banking crisis
General issues
My profile
Barns and Noble
Thanong's Poll
Message Board
Chat Room



Send FREE Greetings!



ROXY.com Is The Fastest Way To Shop!









Try AOL Now!  up to 700 Hours FREE



A blurred economy, but little risk of new crisis

August 11, 2000

DESPITE widespread speculation, Thailand is not likely to suffer from a second economic crisis anytime soon.

There are significant differences between current conditions and those that led to the recent crisis.


See also:
The day of the strong baht policy is over

Palm IIIe for $99

In 1997, there was a complete loss of confidence in the Thai economy. Capital flowed out of the country at an incredible rate, and the baht went into a free-fall.

People panicked, and withdrew their money from the banks. The country depleted its foreign-exchange reserves. Export and domestic consumption plunged. Interest rates soared. Inflation ran out of control.

All of these conditions began to improve in 1999, and they continue to improve. Confidence has been restored to a significant degree. People no longer worry about their bank deposits. The baht has stabilised. Inflation has been subdued.

Most indicators have turned positive - whether private consumption, investments or exports.

"We have gone far beyond the bottom. There is no need of further argument that the economy has not yet recovered if you look at figures of consumption, investment, the government sector, and exports," Somchai Ruchuphand, adviser to Finance Minister Tarrin Nimmanahaeminda, told Prachachart.

Nevertheless, people have begun to express worries about the economy, largely because of rising oil prices and the sliding baht.

"Any assessments of the economy cannot dwell on the emotions of the society because those who suffer will cry out while those who gain are not saying anything," Somchai said.

Deputy Prime Minister Supachai Panitchpakdi yesterday insisted that the country would record economic growth of about 5 per cent this year, thanks mainly to export growth of more than 10 per cent. Supachai made this projection following a report on Wednesday that the National Economic and Social Development Board (NESDB) would revise its growth projection from 5 to 4.7 per cent because of higher oil prices and the weaker baht.

Supachai also dismissed talk of subsidising oil prices by cutting the excise tax. He said doing so would only benefit motorists, while pushing the burden onto the government, which is running a deficit.

Prime Minister Chuan Leekpai also sought to ease fears. He said the NESDB, a government think tank, would have to further study the figures before revising its projection.

"The oil prices might have some impact on the economic growth, but at this point there has not been any attempt to revise the growth projection," Chuan said.

Merrill Lynch Phatra Securities Co reports that private consumption is likely to grow by 4 per cent this year, the same rate as government consumption. It predicted that private investment would grow by 12 per cent, while public-sector investment would increase by 4 per cent.

The current account will continue to register a surplus of US$9.6 billion (Bt389.7 billion). Inflation is under control at 2.5 per cent.

All of these figures show that Thailand has come a long way from where it was in 1997-98. The question is whether it can maintain a sustainable recovery, or whether it will face prolonged sluggish growth such as Japan has experienced for a decade.

Some factors are working against a sustainable recovery.

A prolonged slump in the stock market has made it virtually impossible for companies to raise money.

Meanwhile, credit has continued to shrink. Banks are reluctant to lend given their Bt1.6 trillion in non-performing loans.

Government debt is 52 per cent of the gross domestic product.

The current account, which has registered a surplus since 1998, could run into a deficit in 2002 if the high import trend continues. Then the country will have a problem financing the economy, given the US$92.3 billion in external debt as of March.

Most important in the short term are the jitters created by political uncertainty ahead of the general election later this year. Investors are waiting until the new government is in place and outlines its economic policies.

All of these negative factors will continue to hurt the economy, but they should not drag Thailand into another economic crisis.




Ask Jeeves!



dot com mail,  dot com biz card and Web Registration













PC Hardware



Home ] Baht/economic crisis ] Banking crisis ] Overdrive ] General issues ] My profile ] Barns and Noble ] Thanong's Poll ] Message Board ] Chat Room ]