However, some indicators showed the risk factorsof an increasing in the number of unemployment inthe future. For example, there is a tendency foremployment to decline in some of non agriculturesectors for instance construction sector, retailsector, financial sector and real estate sector. Thenumber of under employment (working time lowerthan 35 hours per week) increased from 520,000people in the fist quarter last year to 630,000people in the first quarter of 2007. The ratio of joboffers to applications dropped from 1.5 percent inthe forth quarter of 2006 to 0.3 percent at the end ofthe first quarter of 2007. The ratio of applications toplacements remained at 2.2 percent. This ratioreveals that recruitment tends to slow down furtherif production and investment are not clearlyimproving. In addition, the skill requirement oflabour demand may not match those of labour inmarket. The lower unemployment rate of 1.6percent in the first quarter still showed that thedemand could not absorb all new labour since thelabour force grew by 1.47 percent in the first quarterof 2007, faster than 1.06 percent in the same periodof last year. - Petroleum consumption(4) declined in the first quarter of 2007 by 5.7 percent and continued todecrease by 3.7 from the average of year 2006despite the increasing in economic activities whichmeaned an increasing in efficiency of petroleumconsumption. As for gasohol consumption, for thefirst quarter of 2007, the consumption continued toincrease by 3.8 from the fourth quarter of 2006.Moreover, in April 2007, petroleum consumptionproceeded to drop by 4.2 percent while gasoholconsumption increased by 10 percent. *********************************************************************************************************** Notice (4) The figures from Department of Energy Business which is 4-month figures, different from 3- month figures of the National Energy Policyand Planning Office but following the same trend *********************************************************************************************************** - Externality stability was favorable. Internationalreserves stood at 71.7 billion US dollars at the endof April 2007. International reserves wereequivalent to 3.5 times of short-term external debtsor 7 months of import, which is considered to bestable level. - Fiscal cash balance recorded a deficit In thesecond quarter of fiscal year 2007(January-March2007), Revenue was 307,517.95 million Baht andtotal expense was 437,267.87 million Baht,increasing from the same quarter of the previousyear by 22.59 percent. Consequently, fiscal balancealso recorded a deficit of 132,226.07 million Bahtwhich increased by 79,541.57 million Baht from thesame quarter of the previous year. When adding tothe 5,691.33 million baht surplus of the off-budgetbalance, the resulting balance total deficit of fiscalcash balance was 126,534.74 million Baht. Afterissuing Bonds and T-Bill, fiscal cash balancerecorded a deficit of 21,274.74 million Baht. - Public debts At the end of March 2007, public debts was 3.21 trillion Baht, equivalent to approximately 38.10 percent of GDP, lower than40.48 percent of GDP at the end of December 2006 and 41.45 percent at the end of March 2006. Financial conditions: Interest rates adjusted downward. Bank deposits slowed down, particularly time deposit. However, credits continued to slow down by more than deposits, thus liquidity in the banking system remained high. Thai baht as well as real effective exchange rate has been on appreciating trend. - The policy rate was lowered. The Monetary Policy Committee decided to lower the policy rate twice, each by 25 basis points, in the first quarter of 2007 to 4.5 percent per annum, in response to the slow down economy and continuously lessened inflationary pressure. The policy rate was lowered consecutively in April and May, each by 50 basis points, to 3.5 percent per annum. Meanwhile the Fed Fund Rate was maintained at 5.25 percent. In other industrial countries, including Japan, Euro zone and the UK, policy rates have been on the rising trend. - Commercial banks’ deposit and lending rates were adjusted downward, particularly long-term deposit rates which were lowered rapidly and exceeded the policy rate cut, while lending rates were slightly reduced. Average MLR and 12-month time deposit rate of five large commercial banks declined by 0.13 and 1.0 percent from the end of 2006 to 7.63 and 3.5 percent per annum at the end of the first quarter respectively. Commercial banks continued to lower interest rates further in the second quarter. At the end of May, therefore, average MLR and 12-month time deposit rate decreased to 7.25 and 2.38 percent per annum respectively. As deposit rates declined at a larger pace than lending rates, the effective spread increased from 2.86 percent in the previous quarter to 3.32 percent in this quarter. - Deposits and Credits slowed down. First quarter commercial banks’ deposits expanded from the same period of 2006 by 2.9 percent, slowing down from 5.7 percent growth in the previous quarter. The reduction in deposit rates decelerated the growth of time deposit to 9 percent, compared to 21.8 percent in the previous quarter. Commercial banks and finance companies’ credits expanded by only 0.8 percent, down from the 6.6 percent growth in the same quarter of last year, with the downtrend in almost all sectors mainly due to the slowdown in private consumption and investment. In addition, credit card spending slowed down notably. - Liquidity in the banking system remained high. The credits (including investment in private securities) to deposits ratio dropped slightly to 91.4 percent at the end of first quarter since credits slowed down faster than deposits. Hence, excess liquidity in the banking system, estimated as disposable liquidity accumulated continuously to approximately 844 billion baht by the end of quarter or increased by 29.2 percent year-on-year. - Thai baht strengthened continuously, averaged at 35.54 baht per US dollar in the first quarter, appreciated by 2.7 and 9.5 percent from the previous quarter and the same period of last year respectively. This is due to the considerable current account surplus, capital inflow to the stock market, as well as the selling of US dollars by exporters, in both spot and forward contracts, which resulted in the rapid appreciation of the baht in March. The baht has been on an appreciating trend to the average of 34.83 and 34.57 baht per US dollar in April and May respectively, and the 5-months average was 35.22 baht per US dollar. The appreciation of the baht at the faster rate than major currencies and most regional currencies caused the nominal effective exchange rate (NEER) and the real effective exchange rate (REER) to appreciate throughout the quarter. Average NEER and REER in the first quarter appreciated by 7.7 and 8.3percent year-on-year respectively, slowing down from the previous quarter. - Stock market and bond market. Average daily trading in stock market was 11.8 billion baht in the first quarter, dropped by 43.5 percent year-on-year, and SET index slightly declined from the end of last year. Domestic unrest and fragile investors’ confidence about political uncertainties depressed the stock market. However, continuing buy of foreign investor, to the net of 66.6 billion baht in the first five months drove SET index to close at 737.4 points at the end of May, increased by 57.6 points from the end of 2006 with market capitalization of 5.5 trillion baht. The downward trend of interest rate and large issuing of BOT short-term bond encouraged the trading in bond market. Daily trading in the first quarter averaged at 50.1 billion baht, increasing by 59.8 percent from the same period of 2006, and escalated to 63.1 billion baht in the period of April - May. The government bond yields dropped by 82-112 basis points during the quarter, which was larger than policy rate cut. In the first five months yield dropped by 128-184 basis points and led total return index to increase significantly.(Continue to).../1.2 World economic..