Thailand cuts growth forecast to 0.6% for 1997
Thailand cuts growth forecast to 0.6% for 1997
BANGKOK (AFP): Thailand has slashed its economic growth
forecast for 1997 to only 0.6 percent because of the plunge in
the baht and the currency turmoil across Asia, the finance
minister said yesterday.
Tarrin Nimmanahaeminda told a news conference of the revision
from an earlier forecast of 2.5 percent, which was the original
target of an International Monetary Fund (IMF) economic rescue
plan for Thailand.
The fresh target would be included in a Letter of Intent to
the IMF, approved by the cabinet Tuesday, to secure a second
installment of US$3 billion from the $17.2 billion bailout
package.
The first tranche of the bailout -- needed to shore up
Thailand's foreign reserves during the country's worst economic
crisis in decades -- was $4 billion.
The government was committed to the IMF program but was
amending growth forecasts because of changes in the domestic and
regional economic situation since the package was negotiated in
August, Tarrin said.
The 1998 gross domestic product growth forecast was also cut
to between zero and 1 percent from 3.5 percent.
Tarrin said the changes were due to the drop in the baht -- to
40 to the dollar compared with 26 before it was floated on July 2
-- and the currency problems across the region, which had also
served to dent the competitiveness of Thai exports.
A government statement said the key target of the IMF package,
that Thailand achieve a 1 percent budget surplus for the fiscal
year to September 1998, would not be changed.
The new forecasts prepared for the IMF also see 1997 foreign
exchange reserves at $23 billion, while the 1998 reserves target
has been revised upwards to 24.8 billion from 24.5 billion.
The end-1997 forecast represents a sharp drop from the end-
October reserve figure of $31.3 billion.
Analysts said the drop was in line with expectations, because
of the central bank's forward currency swap contracts -- which
the bank has said totaled $23.4 billion before July.
Tarrin said that persuading creditors to roll over Thailand's
foreign debts -- estimated at $90 billion, over $70 billion of it
to the private sector -- would be crucial in maintaining the
minimum reserve requirements.
"Everything depends upon our ability to satisfy the
creditors ... that our program will work, that we are prepared to
take tough medicine and work closely with the IMF and the
international community," he said.
The program was needed to sustain Thailand and "pave the way
for real adjustment and recovery," he said.
Among other new forecasts, the government saw export growth
for 1997 at 3. 2 percent while the 1998 export growth forecast
has been cut to 7.9 percent from 8.6 percent.
Imports for 1997 are expected to drop 9.3 percent compared
with an earlier predicted fall of 6.1 percent, with the 1998
import growth forecast to be cut to 0.2 percent from 1.6 percent.
The 1997 inflation rate is now seen at 10 percent rather than
9.5 percent.
The 1997 current account deficit has been revised to 3.9
percent of gross domestic product and in 1998 to 1.8 percent.
The statement said the Bank of Thailand would maintain a tight
monetary policy under existing IMF conditions and the Letter of
Intent.
Bank of Thailand governor Chaiyawat Wibulsawasdi said the
central bank was forecasting a 1997 current account deficit of
$6.4 billion, narrowing to $2.5 billion in 1998.
He said the central bank sees an upward trend in long-term
foreign capital inflows.