(2.5) Production side in 2006 expanded well both in the agricultural and non-agricultural sectors
- Manufacturing production expanded by 6.1 percent, up from 5.2 percent in 2005 in tandem with
strong export growth and domestic-oriented industries. Significant increases in manufacturing production
were witnessed in food, beverages, electronics, vehicles and construction materials.
- Agricultural production grew by 4.4 percent, compared with a negative growth of 3.2 percent in
2005, despite the adverse effects from drought at the beginning of the year and floods in various provinces
between September and October. Major increasing was seen in products such as paddy, cassava, sugar cane and
oil palm.
- The hotel and restaurant industry expanded by 10.5 percent. This was partly due to a low base of
2005 which gradually recovered from the tsunami in 2004. Nonetheless, the 2006 Royal Flora Ratchahpruek Fair
held on November 2006-January 2007 was one factor attracting more tourists into the country. The tourism
income spurred by the event in the last quarter was estimated at 15,000-20,000 million baht
(2.6) Economic stability remained favorable and inflationary pressure clearly subsided in the
latter half of 2006.
- Inflationary pressure continued to decline in the latter half of 2006. In the fourth quarter of
2006, the inflation rate was 3.3 percent, lower than 5.1 percent in the first nine months of 2006. This was
due to the fact that there were significant prices adjustments during the same period of 2005. In addition,
oil prices gradually declined in accordance with the world market and domestic demand continued to fall. As
a result, the inflation rate dropped further to 3.0 percent and 2.3 percent in January and February 2007,
respectively. In the fourth quarter of 2006, the core inflation rate was 1.7 percent, decreasing from 2.4
percent in the first nine months of 2006. Core inflation still continued its downtrend to 1.6 percent and
1.4 percent in January and February 2007, respectively.
For the year, the inflation rate was 4.7 percent, up slightly from 4.5 percent in 2005. Core
inflation was 2.3 percent, edging up from 1.7 percent 2005(2) The producer price index also shows that the
pressure o production has been somewhat eased.
- Employment rose and unemployment rate remained about the same as in 2005. In the fourth
quarter of 2005, the numbers of employees were 36.24 million people, increasing by 0.67 percent from 36
million people in the fourth quarter of 2005. The numbers of employees in agricultural sector dropped by 1.9
percent in the fourth quarter of 2005. Meanwhile the numbers of employees in non-agricultural sector
increased by 2.5 percent. Employment in trade and banking sectors increased by 8.2 percent, whereas
employment in construction and manufacturing sectors rose by 1.4 percent and 3.6 percent respectively.
Unemployment rate was 1.29 percent about the same as in 2005. In 2006, average unemployment rate was 1.51
percent, lower than 1.9 percent in 2005. However, vacancies to registered applicants ratio increased from
0.44 in the third quarter of 2006 up to 0.50 in the fourth quarter of 2006. This figure together with lower
registered applicants to placement ratio indicated a less tension in labor market.
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(2) In the first half of 2006, the inflation rate increased due to rising oil price, increased electricity
bills and public transport fare. The drought also led to higher prices of vegetables and fruit. Moreover,
this high inflation was partly due to the low base of the inflation rate during the oil prices stabilization
period
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- Consumption of petroleum products declined by 2 percent despite of 5 percent expansion of the
economy. Compared with the increase in petroleum consumption of 8.0 percent and 1.2 percent in 2004 and
2005, respectively, this improvement implied a higher energy-efficiency
- Public debts: At the end of December 2005 public debts was 3.16 trillion Baht, equivalent to
approximately 40.48 percent of GDP, lower than 41.14 percent of GDP at the end of September 2006 and 46.4
percent at the end of December 2005.
- Overall external stability was also favorable. International reserves stood at 66.98 billion US
dollars at the end of December 2006, 3.6 times short-term external debts and equivalent to 3.68 months of
import, which is considered as a stabilized level. International reserves rose up to 67.67 billion US
dollars on 23 February 20073.
(2.7) Financial conditions: Interest rates remained on hold in the latter half of 2006. As a
result, overall deposits slowed down, but time deposit still expanded sharply. Meanwhile, credit continued
to slow down, causing liquidity in the banking system to remain high. Thai baht has been on an appreciating
trend. The stock market condition fluctuated.
- The policy interest rate was raised four times in the first half of 2006 from 4.0 percent to 5.0
percent per annum. After the latest tightening in June, the Monetary Policy Committee decided to hold the
policy rate at 5.0 percent throughout the latter half of 2006, in response to the slowing economy and a
reduction in inflationary pressures, before starting to lower the policy rate twice, each by 25 basis
points, in January and February of 2007(3)
- Most commercial banks' reference deposit and lending rates remained steady in the fourth
quarter, after being raised throughout the first three quarters. Average MLR and 12-month time deposit rate
of five large commercial banks increased from 1.125 and 1.50 percent at the end of 2005 to 7.75 and 4.5
percent per annum at the end of 2006 respectively. The effective spread decreased to 2.86 percent at the end
of the fourth quarter, compared to 3.57, 3.60 and 3.48 percent at the end of the first three quarters
respectively, due to continual increase of interest expenditure at a larger pace than interest revenue.
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(3) The accumulation was partly due to exchange rate management scheme.
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(Continue to).../-Credits slowed..