- Import continued to grow. In the third quarter, import value expanded by 8.4 percent with the same growth rate of 4.1 percent in both quantity and price. In term of quantity, import expanded in all categories except for oil import. Import of raw materials increased by 13.4 percent in line with favorable export performance and a pick up in domestic demand, especially steel, metal products, gems and jewelry and integrated circuits. In the mean time, import of capital goods grew by 7.3 percent with 5.2 percent volume growth. This was in tandem with a revival in domestic investment in particular electrical machinery, agricultural machinery and computer parts. There was an import of one aircraft in September. Meanwhile, import of consumer goods such as dairy products, glass lens and electrical appliances expanded dramatically as a result of a Baht appreciation. Import of fuel and lubricants dropped by 3.3 percent resulting from a 6.4 percent reduction in crude oil import value, while import value of petroleum product expanded by 4.5 percent. Shift in energy consumption toward alternative energy source (gasohol, bio-diesel and EGV gas) was partly contributed to a 5.8 percent decline of fuel and lubricant import volumes and 3.6 percent decline in volume of crude oil import.
In the first three quarters, import value increased by 7.3 percent, with 3.5 percent increase in quantity and 3.6 percent increase in price. Import of capital good, raw materials and semi-finished goods and finished goods rose by 2.7, 13.6 and 9.1 percent respectively. Nevertheless, fuel import fell by 3.4 percent owing to a reduction of crude oil import and of petroleum products import by 8.1 and 0.1 percent respectively.
- Trade balance was in a surplus of 2,942 million US dollar in the third quarter of 2007 which equal to 100,567 million baht. For the first nine months of 2007, trade balance recorded a surplus of 8,023 million US dollar or 278,914 million baht.
- Current account registered a surplus of 2,928 million US dollar in the third quarter of 2007 which equal to 99,297 million baht. For the first nine months, current account surplus reached 9,262 million US dollar or 323,375 million baht.
- Production side: Sector improving from the previous quarter was manufacturing sector with 9.0 percent growth, compared to 6.0 and 5.6 percent in the first two consecutive quarters. Major productions were export-oriented namely hard disk drive, air-conditioner and rubber glove. Meanwhile, key products for domestic consumption still experienced a contraction due to a slack in domestic demand such as textile, cement, steel and products and motorcycle.
However, production of passenger cars and commercial cars started to recover in line with higher domestic sales and continued increase in export. Construction sector grew by only 1.4 percent since private construction expanded moderately, picking up from continual contraction in the first two quarters.
Agricultural sector expanded by 4.0 percent, lower from 7.5 percent due to a speed up in harvesting during the same period last year in order to alleviate further damage from flood. Rubber production also declined as a result of heavy rainfall in the plantation area.
In the first nine months, agriculture, manufacturing and service and others grew by 5.0, 5.0 and 4.0 percent respectively.
- Economic stability: Inflation and unemployment rate remain low.
- Inflation rate remains low. In the third quarter of 2007, headline inflation was 1.6 percent lower than 2.2 percent in the first half of the year, mainly due to appreciation of baht which led to lower cost of imported goods. The drops were seen in mobile phone service charges, Ft cost and thus electricity charge rate. However, headline inflation surged to 2.5 percent in October with 10 months average of 2.1 percent. Core inflation rate in the third quarter was 0.7 percent lower than 1.2 percent in the first half of 2007. In October core inflation increased to 1.0 percent, which was equal to 10 months average. Moreover, producer price index rose by 1.5 percent in the third quarter and increased to 4.4 percent in October. For the first 10 months, producer price index increased by 2.2 percent.
- Employment The number of employed person in the third quarter were 37.21 million people, rose by 2.1 percent compared with the same period last year. In addition, numbers of employment in agricultural sector were 15.08 million people, increased by 1.2 percent from the same period last year due to favorable weather conditions. Nonagricultural sector employed 21.63 million people. Employment in manufacturing sector expanded by 5.4 percent, mainly due to increasing exports of frozen seafood and rubber products. Employment in hotel and restaurant and real estate sector also increased by 4.0 percent and 8.8 percent respectively. By the end of the third quarter, the social security scheme had covered 380,313 firms and 8.79 million employees, increased from the same period of last year by 1.9 and 2.9 percent respectively. The unemployment rate remained relatively low at 1.2 percent in the third quarter. However, unemployed with upper college graduated level are accounted for 20 percent of total unemployment, while vocational and technical unemployed person were around 6.3 and 7.5 percent. This reflected the qualification mismatching in labor market. For the first nine months, the overall employment expanded by 1.5 percent and the unemployment rate were 1.5 percent.
- Petroleum consumption has significantly shifted toward gasohol, bio-diesel and LPG. Petroleum consumption continually accelerated from 2.3 percent in the first half of 2007 to 3.8 percent in the third quarter. Total diesel consumption increased by 5.6 percent compared with 0.4 percent in the first half of 2007. In addition, the high speed diesel and low speed diesel consumption rose by 1.9 percent while Bio-diesel (B5) consumption substantially grew by 1,768.3 percent. Total gasoline consumption grew by 4.4 percent. This was mainly due to the expansion of gasohol consumption by 46.2 percent while benzene 91 and 95 continued to decline by 4.7 percent. As a result of high oil price, the consumption pattern has also shifted toward LPG and NGV which recorded 10.2 and 113.29 percent increase respectively. For the first nine months, petroleum consumption increased by 2.8 percent. High speed diesel and Low speed diesel consumption declined by 0.08 percent while demand for bio-diesel (B5) rose by 1,335.7 percent. Consumption of benzene 91 and 95 decreased by 1.7 percent while gasohol consumption increased by 24 percent. LPG and NGV consumption expanded by 13.6 and 107.04 percent respectively.
- External stability International reserve stood at 82.4 billion US dollar at the end of October 2007, equivalent to 3.8 times of short-term foreign debts or 7.3 months of imports
- Fiscal cash balance recorded a surplus of 30,970.6 million Baht in the fourth quarter of fiscal year 2007 (July — September 2007). Government revenue collection was 386,701.9 million baht, increased by 11.4 percent from the same period of 2006, whereas government expenditure was 420,222.3 million Baht, increased by 13.4 percent. Hence, fiscal balance recorded a budget deficit of 33,520.5 million Baht. The non-budgetary surplus of 64,491.1 millionbaht, however, turned the cash balance to a surplus of 30,970.6 million baht, decreased by 15.4 percent from the same period of last year.
In fiscal year 2007, the government ran budgetary deficit of 131,238.6 million Baht, lower than the projection of 146,000 million baht deficit. The non-budgetary deficit of 27,492.8 million baht, added fiscal cash balance up to 158,731.4 million baht. This deficit was financed by issuance of government bond and promissory notes.
- Public Debt At the end of September 2007, public debt stood at 3.17 trillion baht, equivalent to 37.84 percent of GDP, increasing from 37.72 percent of GDP at the end of June 2007 but decreasing from 41.28 percent of GDP at the end of September 2006.
- Financial conditions: Interest rate declined. Bank deposits decelerated. Commercial Banks’ credit
accelerated but liquidity remained high. Currency and stock markets became more volatile due to fluctuation in global financial market. Nominal exchange rate of Thai baht appreciated but real effective exchange rate
depreciated. SET index increased.
- The policy rate was cut The Monetary Policy Committee (MPC) decided to lower policy rate once, by 25 basis points in July to 3.25 percent per annum, in response to the slowdown in domestic consumption and lessened inflationary pressure. The MPC kept the policy rate unchanged in August and October. The Federal Reserve Board lowered Fed Fund Rate in September by 50 basis points and by another 25 basis points in October to 4.5 percent. Euro zone and Japan maintained policy rate at 4.0
and 0.5 percent consecutively.
- Commercial banks’ time deposit and lending rate were adjusted downward in accordance with lower policy rate. Average 3-month time deposit rate of five major commercial banks decreased from 2.38 percent to 2.13 percent per annum at the end of the third quarter. In addition, 12-month deposit rate was lowered to 2.32 percent per annum in October. The MLR lending rates were reduced to 6.99 percent per annum at the end of October. The accelerating inflation rate in October caused the real 12-month time to be negative at -0.19 and real lending rate to decline to 4.5 percent per annum.
- Commercial banks’ deposits slowed down. At the end of the third quarter, deposits expanded from the same period of 2006 by 2.4 percent, decelerating from 2.6 percent growth in the previous quarter. This was mainly due to (1) the continued reduction in deposit rates (2) the shift of time deposit toward BOT bond and (3) the increase in the issuances of bills of exchange by commercial bank.
- Commercial banks’ credits expanded by 3.8 percent accelerating from 2.9 percent in the second quarter, mainly due to the high growth of consumer and financial intermediation loans. However, credits in other sectors have slowed down. Particularly, manufacturing credits continued to decline at a faster rate as business investment has not been recovered. Credit card spending, outstanding balance and cash advance slowed down continuously.
- Liquidity in banking system remained high. Credits to deposits ratio was at 93.5 percent at the end of the third quarter. In addition, excess liquidity in the banking system, estimated as disposable liquidity, accumulated continuously to approximately 919.7 billion at the end of September compared to 848.6 billion in June. Hence, BOT absorbed liquidity via the REPO market continuously.
- NPLs in financial institutions excluding BIBF and credit fanciers increased from the previous quarter by 6.2 billion baht, to 260.4 billion baht, equivalent to 4.43 percent of the total credits at the end of the third quarter. Foreclosed property or NPAs, however, slightly decreased to 166 billion baht.
- Thai commercial banks reported net profit of 9.65 billion baht, compared to net loss of 12.88 billion baht in the last quarter and net gain of 22.873 billion baht in the third quarter of 2006. Although some banks suffered from investment in Collateralized Debt Obligations (CDOs), increasing net interest income and declining provision requirement helped commercial banks to maintain their performance.
- Exchange rate fluctuated in accordance with global financial conditions. Thai baht rapidly appreciated in July due to increasing capital inflow into the stock market and depreciated during late July - August as the US sub-prime crisis led capital flows to unwind. Average exchange rate in the third quarter was 34.01 baht per US dollar, appreciated by 1.8 and 9.7 percent from the previous quarter and the same period of last year respectively. This is mainly due to the surplus in the current account and net capital inflows. As Thai baht appreciated at a faster rate than major currencies except Euro and Yen, thus the average nominal effective exchange rate (NEER) appreciated by 0.7 percent from the second quarter and the real effective exchange rate (REER) depreciated by 0.2 percent due to relatively slowed down in inflation. Nine-month exchange rate average was at 34.73 baht per US dollar and 34.12 baht per US dollar in October.
- Corporate funding declined markedly. The issuance of new securities in the third quarter worth 15.4 million baht compared to 49.6 million baht in the previous quarter and 92.2 million baht in the same period of last year. Fund raised by both financial and non-financial sectors dropped from the same period of last year by 24.2 and 52.6 million baht respectively. Overall accumulated funding in the past
9 months was 107.6 million baht declined from 241.7 million baht at the same period of last year.
- Stock market rallied with fluctuation of foreign capital flows. Daily trading was averaged at 21.9 billion baht, increased by 15.1 percent from the second quarter. SET index closed at 845.5 points compared to 776.8 percent at the end of the second quarter, particularly, energy and petrochemical sectors gained from oil price surges. Stock index fluctuated in July and August, rising to 884.2 points at mid of July and plunged to 750.7 points in mid August resulted from US subprime effect. Nevertheless, foreign capital still flowed into regional and Thai stock markets stimulating by three main reasons; (1) slowdown in US housing market and Fed Fund rate cut in September (2) weakening dollar and (3)
expectation of further interest rate cut. SET index closed at 907.3 points at the end of October with
averaged 9-month daily trading of 16.3 billion baht and foreign investors recorded a net buy of 95.3
billion baht.
- Bond trading accelerated. Daily average outright trading increased from 42 billion baht in the previous quarter to 44 billion baht. Net buy of foreign investors recorded at 7.9 billion baht,
turnaround from net sale of 52.8 billion baht in the first half of the year. The price index declined
slightly. The government bond yields increased, particularly those of long-term bond.
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