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.
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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
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- 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.
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