The Bank of Thailand's (BOT) January economic numbers released last Friday indicate that the Thai economy continues to expand at a favourable rate, led by domestic consumption and exports. In fact, the 25% yoy growth in January exports is the strongest rate of growth over the last 34 months. This is very encouraging given the political and economic uncertainties currently facing the global economy.

The Ministry of Finance (MOF) revised up its 2002 economic growth projections to 5.1% from 5%, implying that the Thai economy expanded by 5.7% in 4Q02. This would exceed the BOT's previous 2002 forecast of 5%.

The BOT is forecasting that the Thai economy will grow in a range of 3.5-4.5%. The MOF is more optimistic, expecting economic growth to be supported by low interest rates, resilient consumer confidence and economic stimulus measures. The MOF bases its economic growth projection on three different scenarios:

1. Assuming a prolonged war in the Middle East, the Thai GDP should grow around 4.6% in 2003;
2. Assuming a short-lived war in the Middle East, the Thai GDP should grow by 5.1%; and,
3. Assuming no war in the Middle East, the Thai GDP should grow by 5.7%.

• Manufacturing Production: In January, the manufacturing production index grew by 13%, the highest growth rate since December 1999. The sectors showing the strongest growth included vehicles, integrated circuits, televisions, block rubber and upstream petroleum products. Increases in production raised overall capacity utilisation to 63.6%.

• Consumption Expenditure: The private consumption index expanded by a very favourable 7.3% in January. This represents the strongest rate of growth since July 1995. In January, passenger car sales rose by 89%, motorcycle sales by 60% and imports of consumer goods by 25%.

• Investment Expenditure: The private investment index grew by 19.5%, compared to 18.5% the previous months. January markets the thirteenth consecutive month of double-digit growth. Commercial car sales increased by 36%, while imports of capital goods expanded at a slower rate of 8.4% and cement sales by 4.2%. However, the year-on-year comparison is slightly misleading since last year's cement sales were abnormally inflated by a price war by the major producers.

• External Position: In January, exports grew by a surprising 25.3% to $5.899bn, the highest growth rate for 34 months and the fifth consecutive month of double-digit growth. Exports of electrical and electronic products enjoyed the strong growth. The BOT is projecting Thai exports will increase by double-digit rates for at least another four months.

Imports grew by 19.8% in January to $5.865bn, leaving the country with a slight trade surplus of $34mn. When combined with the service account, the current account registered a surplus of $654mn and the balance of payments a surplus of $395mn. Foreign reserves remained at a high $39.8bn despite a $123mn debt repayment to the IMF in the month

• Monetary conditions: In January, the overall liquidity remained high with deposits higher than credits of around Bt345bn. Inter-bank lending rates averaged only 1.49% in the month. Commercial bank credits (adjusting for debt write-offs and credits transferred to AMCs) slightly improved by 3.8% yoy, while deposits expanded only 1.2%.