Mr. Mathee Supapongse, Senior Director. The Thai economy started to recover in December 2011 across all sectors after the floods’ impact began to subside. Economic stability remained sound as reflected by declining inflation. Although the unemployment rate rose slightly from the previous month, it remained low and is expected to decline going forward. Meanwhile, balance of payments registered a deficit, mainly due to Thai Direct Investment outflows.

In 2009, the overall economy contracted by 2.3 percent year-on-year (yoy), the first time in a decade, due to the global financial crisis which significantly affected Thailand’s major trading partner countries. As a result, the Thai exports sharply shrank which also caused continuing impacts on manufacturing productions, business confidence, as well as domestic consumption and investment.

In 2009 Q3, respondent financial institutions kept their credit standards for corporate loans unchanged from the previous quarter for the first time since the survey had been conducted in 2007 Q4, less tightened than their expectations in the 2009 Q2. Meanwhile, credit standards for housing loans had been eased slightly. This reflected respondent financial institutions’ lower risk perception due to improved general economic conditions and industry-specific outlook, together with the acceleration of credits extension by specialised financial institutions under government stimulus packages.

Overall business activity expanded from the previous quarter following favorable domestic and foreign demand according to the Economic/Business Information Exchange Program between the Bank of Thailand and 316 firms nationwide in 2011 Q31/. Exports of goods and services continued to expand. In particular, vehicle production grew significantly to fulfill the backlog of orders incurred during the supply chain disruption. Domestic consumption and investment remained strong. Looking ahead, industrial production and exports are expected to be affected by the widespread floods but the impact would be temporary. Meanwhile, the downside risk on export growth from the slowdown in the U.S. and the euro area economies increased. Labor shortages and difficulty in price adjustments also remained constraints to businesses.

FAQ’s (Focused and Quick) are short analytical articles to share new ideas or information with wider audience, for better mutual understanding.

International Monetary Fund Washington, D.C. USA

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