1

Macroeconomic Conditions

For the First 6 Months of 2003

by

M.R. Pridiyathorn Devakula Governor of the Bank of

Thailand19 August 2003

2

-2

0

2

4

6

8

10

Q11999

Q2 Q3 Q4 Q12000

Q2 Q3 Q4 Q12001

Q2 Q3 Q4 Q12002

Q2 Q3 Q4 Q12003

growth yoy growth qoq

3.9

2000 = 4.6 2001= 1.9

Gross Domestic Product (1988 prices)

%

1999 = 4.4

5.1

5.8

Source : NESDB

2002 = 5.3

6.2

Macroeconomics Team tel. 0-2283-5651 16/06/03

6.7

1.5

2.1

3Contributions to GDP Growth (%y-o-y)

-6

-4

-2

0

2

4

6

8

10

Q12000

Q2 Q3 Q4 Q12001

Q2 Q3 Q4 Q12002

Q2 Q3 Q4 Q12003

%

Net Exports G&S

Private consumption

Private Investment

Government consumption

Government Investment

GDP

Source: NESDB, additional calculations done by Macroeconomics Team Note: Change in inventories and statistical discrepancies, which could be significant, are not included and hence account

for the difference between GDP and the sum of shown components

4

Q2 Assessment

from BOT Indicators

5

Demand Side

6

2.32.8 3.1

2.4 2.42.9

4.2

5.6

6.9

5.3

-2

0

2

4

6

8

Q12001

Q12002

Q12003

Private Consumption Index

Economic Indicators Team Tel. 0-2283-5648 31 Jul 2003

%Y-o-Y

Private consumption continued to expand despite some deceleration in Q2

due to SARS and a more moderate growth of passenger car sales.

7

40

45

50

55

60

Jan2001

Apr Jul Oct Jan2002

Apr Jul Oct Jan2003

Apr

Business Sentiment Index>50 improving

Jun 03 = 49.5

Source: BOT survey

Investor and consumer confidence proved resilient.

BSI

50

60

70

80

90

100

Jan2001

Apr Jul Oct Jan2002

Apr Jul Oct Jan2003

Apr

Consumer Confidence Index

Jun 03 = 95.9

> 100 improving

Source: The University of the Thai Chamber of Commerce

8Investment activities recently picked up

as uncertainties from the Iraqi war and SARS faded away…

15

25

35

45

55

65

Jan

-99

Ap

r-9

9

Jul-9

9

Oct

-99

Jan

-00

Ap

r-0

0

Jul-0

0

Oct

-00

Jan

-01

Ap

r-0

1

Jul-0

1

Oct

-01

Jan

-02

Ap

r-0

2

Jul-0

2

Oct

-02

Jan

-03

Ap

r-0

3

1995 = 100

Source: Bank of Thailand Economic Indicators Team 28 July 2003

PII (3-m ma)

Equipment (3-m ma)

Construction (3-m ma)

2002 Jan03 Feb03 Mar-03 Apr-03 May-03 Jun-03

PII (MA3) 53.8 51.9 51.8 52.2 54.5 55.6

- Equipment (MA3) 55.4 53.8 53.7 54.0 56.0 56.8

- Construction (MA3) 48.6 45.8 45.7 46.6 49.9 51.6

9

Private Investment Index

Economic Indicators Team Tel. 0-2283-5648 31 Jul 2003

%Y-o-Y

4.9 4.3

-5.5-2.1

14.117.8

37.2

25.0

13.810.2

-15

0

15

30

45

Q12001

Q12002

Q12003

But the year-on-year growth rate of PII slowed down, partly due to base effect.

10

7.3

30.2

10.8

25.7

39.534.7

56.9

29.6

59.6

0

10

20

30

40

50

60

Q12001

Q12002

Q12003

Net Profit (Loss) of Non-bank Listed Companies

Source: Stock Exchange of Thailand 7 Aug 2003

Bn baht

-118.1

-81.2

159.4

77.9

-200

-150

-100

-50

0

50

100

150

200

1999 2000 2001 2002

Bn baht

Annual

Quarterly

11

-80

-60

-40

-20

0

20

40

60

80

Q1-00 Q3-00 Q1-01 Q3-01 Q1-02 Q3-02 Q1-03

-80

-60

-40

-20

0

20

40

60

80

Cash balance (RHS)

Revenue (LHS)

Expenditure (LHS)

Billion baht

Source: Comptroller General Department Public Finance Team Tel. 283-5628 25 Mar. 03

8.8

13.2

32.9

Government Position% y-o-y

12

-90

-70

-50

-30

-10

10

30

50

70

90

Q1-00 Q3-00 Q1-01 Q3-01 Q1-02 Q3-02 Q1-03

Cash balance

Billion baht

Source: Comptroller General Department Public Finance Team Tel. 283-5628 08 Aug 03

Budgetary balance and Non-budgetary balance

Budgetary balance

Non-budgetary balance 32.9

13Export expanded favourably both in value and quantity terms.

Export Growth (US$ term)

%Y-o-Y 20022003

Q1 Q2 H1 May Jun

Agriculture 7.5 36.4 25.5 31.0 24.0 25.2

Fishery -19.3 10.0 8.2 9.1 14.4 -4.3

Manufacturing 6.3 20.5 16.2 18.3 12.8 13.8

- Labor -1.4 9.2 2.1 5.5 -1.4 -3.8

- High – tech 6.9 21.0 17.5 19.2 12.2 15.3

- Resource 5.1 11.7 15.2 13.5 16.9 17.1

Total 5.7 21.3 16.8 19.0 13.5 15.0

Price -7.2 5.8 6.7 6.3 5.8 5.8

Quantity 13.9 14.7 9.5 12.0 7.3 8.6

Source: Constructed from data of Customs Department BOP Analysis Team 29 Jul 03 (0-2283-5625)

May 2003 = $6.5 Bn (13.5%) Jun 2003 = $6.5 Bn (15.0%)

14

Export Growth (%YoY)

-1.2 -0.7

-11.0-13.4

-6.5

3.3

11.115.2

21.316.8

-20

-10

0

10

20

30

Q12544

Q12545

Q12546

BOP Analysis Team 29 Mar 03 (0-2283-5625)

Nevertheless, the growth of export value decelerated slightly from May 2003 onwards due to base effect.

15Thailand continued to benefit from a diversified export structure…

Source : Customs Department The Balance of Payments Team, 4 Aug 03

Jan – Jun 03 % Share Contribution

Rubber 100.7 3.5 2.1

Integrated circuits and parts 38.1 5.4 1.8

Vehicle parts and accessories 39.8 4.9 1.6

Base metal products 40.0 3.5 1.2

Plastic products 28.4 4.2 1.1

Chemical products 66.6 1.9 0.9

Electronic appliance 9.6 8.1 0.8

Petroleum products 27.4 1.8 0.5

Computer and parts 4.1 9.7 0.5

Rubber products 24.5 1.9 0.4

Canned seafood 17.2 2.3 0.4

Telecommunication equipments 32.7 1.3 0.4

Garments 7.1 3.4 0.3

Furniture and parts 14.0 1.4 0.2

Rice 7.2 2.0 0.2

Summation 23.1 55.3 12.3

Total Exports (Custom basis) 18.9 100.0 18.9

16

Source: Customs Department * = Custom basis

…and expanding regional markets.

BOP Analysis Team 30 Jul 03 Tel. 283 - 5625

2003

Destination 2002 Q1 Q2 H1 May Jun

USA 1.7 7.4 -0.1 3.4 -0.9 -8.1

ASEAN 7.3 20.0 16.5 18.1 17.8 11.0

EU -3.2 23.7 12.6 18.1 11.3 6.0

Japan -0.6 20.3 12.2 16.1 10.0 12.3

Hong Kong 11.4 30.5 5.9 17.1 0.2 9.0

China 23.7 88.6 74.5 81.3 65.0 79.1

Taiwan 2.2 17.1 45.8 31.4 35.0 55.8

All 5.3 22.1 15.8 18.9 14.1 12.3

17

Current Account

-500

0

500

1000

1500

Jan2544

Apr Jul Oct Jan2545

Apr Jul Oct Jan2546

Jun

Trade Balance Service Account

BOP Analysis Team 1 Aug 03 (0-2283-5625)

Mil. US$

Jun 03 = 797

Despite an overall deficit in the service account due to the impact of SARS, the current account remained in surplus on the back of a strong trade surplus.

Nevertheless, signs of recovery in the tourism industry and hence the service account already emerged.

18

Thousand Persons% y-o-y

-60

-50

-40

-30

-20

-10

0

10

20

Jan 2001 Jul Jan 2002 Jul Jan 2003

200

400

600

800

1,000

1,200

Source : Tourism Authority of Thailand Sectoral Studies 2 Team Tel. 283-5643 25/06/03

% y-o-y (LHS)

No.of tourists (RHS)

11- Sep

SARS

2002 Q1-03 Q2-03 Apr-03 May-03 Jun-03

Occupancy rate (%) 60.6 65.4 41.4 43.1 38.5 42.9

No. of tourists (‘000) 10,799 2,850 1,457 468 400 589

%y-o-y 7.3 -1.6 -40.0 -44.8 -50.4 -23.8

Number of tourists and occupancy rate have recovered.

19

Services Income & Transfers

Source : BOT and constructed from data of Tourism Authority of ThailandBOP Analysis Team

Tel. 0-2283-6882 ,0-2283-5625Last update :23 Jul 03

Receipts

- Tourism (in)

- Invest’Income

Payments

- Tourism (out)

- Invest’ Income

Transfers

TOTAL

Millions of US$

4,211

18,673

7,903

1,974

15,079

3,303

4,695

617

2002

- Private

- Public

- Private Interest 1,343

- Private Profit & Dividend 2,199

392

1,582

- Public 1,047

-206

3,432

1,001

469

3,837

650

1,524

199

Q2

1,001

294

120

349

190

1,225

8,209

3,091

874

1,350

2,470

396

H1

606

1,402

209

665

390

7,380

2003

101

1,232

404

159

250

440

61

137

233

25

134

47

1,192

Jun/p

1,431

4,778

2,090

405

700

946

197

312

401

89

316

200

3,543

Q1

-185

1,118

267

187

194

573

54

63

439

43

143

65

1,358

May

20

Net Capital Flow

Source : Data constructed from F.T. forms

Balance of Payments Analysis Team Tel. 0-2283-6726

Millions of USD 2002P2002P 2003P

H1 Q3 Q4 Q1 Apr May

Private Sector -5,434 -3,482 -192 -1,760 -2,705 8 -1,663

- FDI 1,139 688 -210 661 316 -87 260

Non-bank 970 555 -246 661 315 -90 260

- Portfolio -2,043 -653 -309 -1,081 -552 80 -3

- Loans -3,844 -2,019 -977 -848 -717 -353 54

Bank -1,618 -552 -650 -416 -418 -391 -74

Non-bank -2,226 -1,467 -327 -432 -299 38 128

- Other Bank Assets 4,333 1,298 2,216 819 -736 363 -678

- Other -5,019 -2,796 -912 -1,311 -1,016 5 -1,296

Gov’t & SE -2,585 -583 -1,688 -314 -190 -200 -220

BOT 4,032 3,351 65 616 -1,533 -8 1,184

Total Capital Flow -3,987 -714 -1,815 -1,458 -4,428 -200 -699

21Balance of Payments

Billion of baht2003

2002 Q1 Q2 H1 May Jun

Trade Balance 3.4 1.1 1.4 2.5 0.6 0.7

Exports 66.8 18.2 18.9 37.0 6.5 6.5

(%Y-o-Y) (5.7) (21.3) (16.8) (19.0) (13.5) (15.0)

Imports 63.4 17.1 17.4 34.5 5.9 5.8

(%Y-o-Y) (4.4) (19.2) (12.1) (15.5) (13.2) (9.7)

Services & Transfer 4.2 1.4 -0.2 1.2 -0.2 0.1

Current A/C 7.6 2.5 1.2 3.7 0.4 0.8

Net Capital Movement -3.1 -4.4 -0.7

Private -4.7 -2.7 -1.7

Public1/ 1.6 -1.7 1.0

Overall Balance 4.2 -2.1 1.0 -1.1 -0.1 0.9

Reserves 38.9 37.6 39.3 39.3 38.9 39.3

Source: Compiled by Bank of ThailandBOP Analysis Team

29 Jul 03 (0-2283-5625)

Note: Including BOT

22

Supply Side

23

% (Y-O-Y) 2002 2003

Q1 Q2 H1 May Jun

Farm Income

Production

Price

11.7

0.8

10.9

18.7 34.5 25.1 35.8 22.1

3.5 15.3 8.1 14.4 4.2

14.7 16.7 15.7 18.8 17.1

Farm Income

Sectoral Analysis Team 2

Tel. 283-5643 29/07/03

Farm income continued to rise strongly and was a support factor toprivate consumption, particularly motorcycle and commercial car sales.

24

Manufacturing Production Index (%YoY)

1.4 1.1 0.91.8

4.2

7.9

10.7 11.4

14.1 13.7

-5

0

5

10

15

Q1 2001 Q1 2002 Q1 2003

Sectoral Studies 1 Tel.0-2283-5646 1/8/03

Manufacturing production continued to expand buoyantly.

25Capacity utilization trended upward except in June when there were

temporary factory shutdowns for maintenance in the tobacco, wire rod and upstream petrochemical industries.

45

50

55

60

65

70

75

80

Jan 00 Jul Jan 01 Jul Jan 02 Jul Jan 03

Jun64.8

Source: BOT Survey Sectoral Studies 1 Team Tel. 0-2283-5646 1/8/03

Note : Cap U is constructed from survey data of 36 industrial categories which altogether represent 44.5% of the valued added in the manufacturing sector.

Cap U

Cap U (sa, 3-m ma)Jun67.1

Capacity Utilization

26

Sectoral Studies 1 Team Tel.0-2283-5646 29/7/03Note : P = PreliminarySource : Constructed from BOT survey

Weight

1995

Average

1995-1996

2002

Year

2003

Q1 Q2 H1 May JunP

Vehicles

Petroleum

Electronics

Beverages

Food

Construction

Iron & Steel

Tobacco

Others

10.2

7.2

6.4

5.5

3.5

2.4

2.1

1.9

5.3

74.5

89.5

65.9

82.6

40.3

88.0

64.7

79.7

78.9

54.6

76.2

59.7

50.5

45.1

56.9

60.6

53.8

71.5

65.5

78.9

59.6

54.2

82.2

56.1

61.7

56.8

78.8

66.9

78.9

67.0

55.4

49.2

58.9

60.2

51.9

78.5

66.2

78.9

63.3

54.8

65.7

57.5

61.0

54.4

78.7

68.9

80.6

70.8

56.4

46.1

64.1

65.1

63.4

80.3

71.7

78.3

67.6

50.7

40.0

58.0

54.8

42.4

75.9

Total(36 Pro.)

44.5 75.0 59.9 67.2 66.0 66.6 68.4 64.8

UNIT : %Capacity Utilization

27

Sectoral Studies 1 Team Tel.0-2283-5646 1/8/03Source : Constructed from BOT survey

UNIT : %Top-10 Capacity Utilization Rates in Jun 2003

Going forward, industries with high capacity utilization rates are likely to expand investment ...

Weight Average 2002

1995 1995-1996 Total Q1 Q2 May Jun

1. Washing machines 0.09 72.7 86.8 104.8 114.8 113.7 141.2

2. Integrated circuits 1.90 77.1 81.8 98.6 111.6 117.7 108.2

3. Tyres 0.66 90.1 95.7 102.9 100.3 104.3 106.6

4. Upstream Petrochemical (1,000 tons)0.39 76.2 87.1 99.1 102.9 108.6 96.7

5. Zinc metals 0.03 90.3 91.8 110.5 81.8 86.6 96.6

6. Fans 0.10 68.6 68.4 78.6 104.4 109.8 96.4

7. Pulp(tons) 0.17 77.6 88.9 93.2 98.3 102.0 96.4

8. Galvanized iron sheet 0.27 68.2 86.7 88.5 95.8 107.2 92.2

9. Plastic pellets 0.17 56.1 86.2 91.4 91.4 91.4 91.4

10. Refrigerators 0.40 79.6 70.0 91.9 79.3 77.9 85.2

2003

28

Source: BOT Survey

Note : Cap U is constructed from survey data of 36 industrial categories which altogether represent 44.5% of the valued added in the manufacturing sector.

Capacity Utilization and Private Investment Index

0

20

40

60

80

100

120

Jan95

Jul Jan96

Jul Jan97

Jul Jan98

Jul Jan99

Jul Jan00

Jul Jan01

Jul Jan02

Jul Jan03

35

45

55

65

75

85

Cap U excluding liquor

(SA)

PII (LHS)

Index Per cent

… as Private Investment Index (PII) and capacity utilization have always been highly correlated.

Correlation = 0.96

29

Economic Stability

30

0

500

1,000

1,500

2,000

2,500

Jan Apr Jul Oct-2

0

2

4

6

Inflation

UnemploymentThousand persons Rate (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan2000

Jan2001

Jan2002

Jan2003

Headline CPI Core CPI

Jul 03 Headline : 1.8 % Core : 0.1 %

20012002

20012002

20032003

Internal Stability

Jun-01 Jun-02 Jun-03

thousand persons

807 641 719

rate 2.4% 1.9% 2.1%

%

31

0

10

20

30

40

50

60

Q3-01 Q4-01 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03

Public Debt% GDP

Source: Public Debt Management Office Public Finance Team Tel. 283-5628 08 Aug 03

50.5

54.256.6

54.253.554.2

57.6

32

-500

0

500

1,000

1,500

2,000

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03

38

39

40

41

42

43

44

45

2-Ja

n-0

2

30-J

an-0

2

28-F

eb-0

2

28-M

ar-0

2

28-A

pr-

02

31-M

ay-0

2

28-J

un

-02

30-J

ul-

02

28-A

ug

-02

25-S

ep-0

2

24-O

ct-0

2

21-N

ov-

02

23-D

ec-0

2

23-J

an-0

3

21-F

eb-0

3

21-M

ar-0

3

23-A

pr-

03

26-M

ay-0

3

23-J

un

-03

23-J

ul-

03

Exchange Rate

External Debt

Current Account

Reserves / Short-term Debt

Million USDB/$

Billion USD

Jun = 797

(SA)31 July 03

41.98

0

30

60

90

120

'97 '98 '99 Q12000

Q3 Q12001

Q3 Q12002

Q3 Q12003

Public NonbankBank

0

1

2

3

4

'97'98Q11999

Q3 Q12000

Q3 Q12001

Q3 Q12002

Q3 Q12003

May

3.3

0.7

55.3

May

25 bsp R/P cut(21 Jan)

25 bsp R/P cut(19 Nov)

50 bsp R/P cut(27 Jun)

External Stability

33

Monetary Sector

34

36

39

42

45

48

Ju

l-00

Sep-0

0

No

v-00

Jan-0

1

Mar-0

1

May-0

1

Ju

l-01

Sep-0

1

No

v-01

Jan-0

2

Mar-0

2

May-0

2

Ju

l-02

Sep-0

2

No

v-02

Jan-0

3

Mar-0

3

May-0

3

Ju

ly-03

Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621

100

110

120

130

140

Ju

l-00

Sep-0

0

No

v-00

Jan-0

1

Mar-01

May-01

Ju

l-01

Sep-0

1

No

v-01

Jan-0

2

Mar-02

May-02

Ju

l-02

Sep-0

2

No

v-02

Jan-0

3

Mar-03

May-03

Ju

l-03

0.8

0.9

1.0

1.1

1.2

Source : The Bank of Thailand

Movements of Major Currencies (Jul. 2000– Jul. 2003)

USD/EURO

JPY/USD

BAHT/ USD

118.66

1.14

41.78

July

35

0

1

2

3

4

5

6

7

8

9

Jan-01 Jul-01 Jan-02 July 02 Jan 03 Jul-03

INTEREST RATES

14-day R/P

Source : The Bank of Thailand

% p.a.

Last Update : 13 Aug 2003Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621

MLR

Nominal 12-m Time Deposit

5.7

1.06

1.25

36

-15

-10

-5

0

5

10

15

20

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03

Sources: BOT reports and surveys, Financial Institution Policy GroupNote: Including Thanachart Bank Last Update: 29 Jul 2003

% yoy

Deposits

Jun 03 p/

Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621

Claims on private sector (adding back debt write-off and transferred loan)

* claims (adding back debt write-off and transferred loan)

GROWTH RATE OF BANKS’ DEPOSITS

AND CLAIMS ON PRIVATE SECTOR

3.3

1.2

Credits extended by commercial banks,

finance companies, and credit foncier companies

7.3

37

-30

-10

10

30

50

Jan2001

Apr Jul Oct Jan2002

April July Oct Jan2003

Apr

Housing loans (8.3%)

Public utility (5.5%)

Personal consumption (3.3%)

-50

-30

-10

10

Jan2001

Apr Jul Oct Jan2002

April July Oct Jan2003

Apr

Manufacturing (26.0%) Commerce (14.5%)Real estates (5.1%) Construction (3.1%)Hotel and restaurant (3.1%)

Credits of Commercial Bank Classified by Sectors(change from the same period last year)

May

May

38

843.3772.6 778.9 772.5

0

200

400

600

800

1000

Jun-02 Dec-02 Mar-03 Jun-03

Total NPL (Commercial banks+Finance companies)

18 Aug 2003

Bn bath

Source: Corporate Debt Restructuring Group

39

60.4

287.9

38.9

311.1

426.8428.5

0

100

200

300

400

500

Debtors that havesuccessfully

restructured theirdebt and in the

process of repayment

Debtors in theprocess of

restructuring

Debtors in the courtprocess

Total NPL classified by debtors

7 Aug 2003

Bn bath

Source: Corporate Debt Restructuring Group

Dec 2002

Mar 2003

40

Economic Outlook

41

Economic Outlook for the Rest of the Year

Support factors– Gradual increase in capacity utilization is likely to raise investment activities

going forward

– Continued expansion in employment

– Sound internal and external stabilities

– Low interest rates and improvement in commercial bank lending

– Rising farm income

– Government measures, e.g., SME measures, housing projects for low income

people, etc.

Risk factors– Regional terrorist threats may delay the full recovery of tourism

– Weak US dollar affects the competitiveness of Thai exports

– Fragile recovery of G3

– Rising oil prices

42

Forecast Summary

2002 2003 2004GDP Growth(old)

5.2 4.5 – 5.5

(3.5 – 4.5)

5.0 – 6.0

(4.5 – 6.0)

Core Inflation(old)

0.4 0.0 – 0.5

(0.0 – 1.0)

0.0 – 1.0

(1.0 – 2.0)

Headline Inflation(old)

0.7 1.0 – 2.0

(1.0 – 2.0)

1.0 – 2.0

(1.0 – 2.0)

( ) April 2003 Inflation Report