Thailand sees negative economic growth in 1997

Thailand sees negative economic growth in 1997

BANGKOK (Reuters): Thailand's gross domestic product is expected to shrink 1.0-1.5 percent in 1997, the head of the finance ministry's fiscal policy office said on Thursday.

Sommai Phasee, director-general of the fiscal policy office, told reporters the contraction forecast was caused by a slowdown in the economy and massive cuts in spending in the 1997/98 (October-September) budget.

"After the government further cut the budget by another 18 billion (baht, this week), authorities are revising the economic forecast," Sommai said.

"According to preliminary data, it seems like we are going to have a negative growth of 1.0-1.5 percent this year," he told reporters.

However, Sommai said he saw the contraction as normal during an adjustment period which Thailand is going through.

"Even Japan faced negative growth before. I think this will be acceptable to the IMF," he said.

Under a $17.2 billion economic rescue program sponsored by the International Monetary Fund, Thailand was required to produce a budget surplus equivalent to one percent of gross domestic product for this fiscal year. The government had earlier slashed 100 billion baht from the current budget.

Thailand's central bank had predicted in mid-October that GDP would grow at a rate higher than one percent in 1997 despite the worst economic crisis in decades. But it added the figure would be slightly lower than the 2.5 percent forecast earlier by authorities.

Thailand's GDP rose 6.4 percent in 1996.

The IMF said in August, when it arranged the massive multilateral bailout program, that it still expected the economy to grow 2.5 percent this year and 3.5 percent in 1998. The IMF assumed the baht value at 32 per dollar but it recently fell below 40 to the dollar before staging a small recovery.