Rising oil prices and the spectre of a new Gulf War failed to slow Thailand’s economic momentum in November, according to economic data released by the Bank of Thailand (BOT) last Friday. The central bank reported that exports for November jumped 16.7% yoy while manufacturing capacity utilisation rose to 63.5% from 61.8% the previous month

Also noteworthy was the BOT’s strong foreign reserves of $38.4bn, as of December 20. This has prompted the government to decide to pay off the remaining Bt4.8bn loan to the International Monetary Fund before the due date in September 2004. Liquidity in the financial system remains high, with deposits outnumbering loans by Bt423bn. Accordingly, we expect commercial banks to further cut interest rates in 1Q03.

With the economy still showing no signs of slowdown, the Finance Ministry last week revised up its 2002 GDP forecast from 4.8% to 5%. This follows the December 16 revision by the National Economic and Social Development Board (NESDB) from 4-4.5% to 4.9%.

• Manufacturing Production: The manufacturing production index increased 10.9% in November, with growth seen in every industrial sector. The strongest production growth was in vehicles, iron & steel, and electronics & electrical appliances. Capacity utilisation improved to 63.5% in November from 61.8% the previous month.

• Consumption Expenditure: The private consumption index rose 4.6% yoy, aided by a 69.4% surge in motorcycle sales and a 16.3% jump in imports of consumer goods. Passenger car sales, however, fell 11.2% as would-be buyers postponed purchases until the end-of-year launch of new models such as the Toyota Soluna Vios and New Honda City.

• Investment Expenditure: The private investment index rose 22.2% yoy but this was well down on yoy increases of 29.7% and 46.1% registered in October and September respectively. Commercial car sales enjoyed strong growth of 51%. However imports of capital goods and cement sales saw a substantial slowdown, rising by just 2.5% and 11% respectively. This is believed to be due to the slower pace of global economic recovery, accentuated by mounting tensions between the US and Iraq.

• External Position: Export growth remains one of the brightest spots on Thailand’s economic landscape. Exports in November climbed 16.7% yoy to $6,155mn - the fourth consecutive month that exports topped the $6bn mark. The negative news, however, was a 13.9% yoy jump in imports to $5,805mn. As a result, Thailand’s trade surplus shrunk from $488mn in October to $350mn. The country posted a current account surplus of $949mn in November and a balance of payments surplus of $737mn. Foreign reserves remained at an impressive $37.7bn despite a $100mn debt repayment to the IMF in the month.

• Monetary conditions: The BOT’s Monetary Policy Committee cut its 14-day repo rate by 0.25% to 1.75% on November 19 following a surprise 0.5% reduction in US interest rates. Liquidity in the financial system remained high in November with overnight interbank lending rates averaging 1.64%. Commercial bank credits (adjusting for debt write-offs and credits transferred to AMCs) increased by 2.7% yoy, while deposits expanded at 2.8%. NPLs were relatively stable at 10.01% of total loans.