1. 1 Macroeconomic Conditions For the First 6 Months of 2003 by M.R. Pridiyathorn Devakula Governor of the Bank of Thailand 19 August 2003

2. 2 3.9 2000 = 4.62001= 1.9 Gross Domestic Product (1988 prices) % 1999 = 4.4 5.1 5.8 Source : NESDB 2002 = 5.3 6.2 Macroeconomics Team tel. 0-2283-565116/06/03 6.7 1.5 2.1

3. 3 Contributions to GDP Growth (%y-o-y) % Net Exports G&S Private consumption Private Investment Government consumption Government Investment GDP Source:NESDB, additional calculations done by Macroeconomics Team Note:Change in inventories and statistical discrepancies, which could be significant, are not included and hence account for the difference between GDP and the sum of shown components

4. 4 Q2 Assessment from BOT Indicators

5. 5 Demand Side

6. 6 Private Consumption Index Economic Indicators Team Tel. 0-2283-564831 Jul 2003 %  Y-o-Y Private consumption continued to expand despite some deceleration in Q2 due to SARS and a more moderate growth of passenger car sales.

7. 7 Business Sentiment Index >50 improving Jun 03 = 49.5 Source: BOT survey Investor and consumer confidence proved resilient. BSI Consumer Confidence Index Jun 03 = 95.9 > 100 improving Source: The University of the Thai Chamber of Commerce

8. 8 Investment activities recently picked up as uncertainties from the Iraqi war and SARS faded away… 1995 = 100 Source: Bank of ThailandEconomic Indicators Team 28 July 2003 PII (3-m ma) Equipment (3-m ma) Construction (3-m ma) 2002Jan03Feb03Mar-03Apr-03May-03Jun-03 PII (MA3)53.851.951.852.254.555.6 - Equipment (MA3)55.453.853.754.056.056.8 - Construction (MA3)48.645.845.746.649.951.6

9. 9 Private Investment Index Economic Indicators Team Tel. 0-2283-564831 Jul 2003 %  Y-o-Y But the year-on-year growth rate of PII slowed down, partly due to base effect.

10. 10 Net Profit (Loss) of Non-bank Listed Companies Source: Stock Exchange of Thailand 7 Aug 2003 Bn baht Annual Quarterly

11. 11 Cash balance (RHS) Revenue (LHS) Expenditure (LHS) Billion baht Source: Comptroller General DepartmentPublic Finance Team Tel. 283-5628 25 Mar. 03 8.8 13.2 32.9 Government Position %  y-o-y

12. 12 Cash balance Billion baht Source: Comptroller General DepartmentPublic Finance Team Tel. 283-5628 08 Aug 03 Budgetary balance and Non-budgetary balance Budgetary balance Non-budgetary balance 32.9

13. 13 Export expanded favourably both in value and quantity terms. Export Growth (US$ term) %Y-o-Y2002 2003 Q1Q2H1MayJun Agriculture7.536.425.531.024.025.2 Fishery-19.310.08.29.114.4-4.3 Manufacturing6.320.516.218.312.813.8 - Labor-1.49.22.15.5-1.4-3.8 - High – tech6.921.017.519.212.215.3 - Resource5.111.715.213.516.917.1 Total5.721.316.819.013.515.0 Price-7.25.86.76.35.8 Quantity13.914.79.512.07.38.6 Source: Constructed from data of Customs Department BOP Analysis Team 29 Jul 03 (0-2283-5625) May 2003 = $6.5 Bn (13.5%) Jun 2003 = $6.5 Bn (15.0%)

14. 14 Export Growth (%YoY) BOP Analysis Team 29 Mar 03 (0-2283-5625) Nevertheless, the growth of export value decelerated slightly from May 2003 onwards due to base effect.

15. 15 Thailand continued to benefit from a diversified export structure… Source : Customs Department The Balance of Payments Team, 4 Aug 03 Jan – Jun 03 %  ShareContribution Rubber100.73.52.1 Integrated circuits and parts38.15.41.8 Vehicle parts and accessories39.84.91.6 Base metal products40.03.51.2 Plastic products28.44.21.1 Chemical products66.61.90.9 Electronic appliance9.68.10.8 Petroleum products27.41.80.5 Computer and parts4.19.70.5 Rubber products24.51.90.4 Canned seafood17.22.30.4 Telecommunication equipments32.71.30.4 Garments7.13.40.3 Furniture and parts14.01.40.2 Rice7.22.00.2 Summation23.155.312.3 Total Exports (Custom basis)18.9100.018.9

16. 16 Source: Customs Department * = Custom basis …and expanding regional markets. BOP Analysis Team 30 Jul 03 Tel. 283 - 5625 2003 Destination 2002Q1Q2H1MayJun USA1.77.4-0.13.4-0.9-8.1 ASEAN7.320.016.518.117.811.0 EU-3.223.712.618.111.36.0 Japan-0.620.312.216.110.012.3 Hong Kong11.430.55.917.10.29.0 China23.788.674.581.365.079.1 Taiwan2.217.145.831.435.055.8 All5.322.115.818.914.112.3

17. 17 Current Account BOP Analysis Team 1 Aug 03 (0-2283-5625) Mil. US$ Jun 03 = 797 Despite an overall deficit in the service account due to the impact of SARS, the current account remained in surplus on the back of a strong trade surplus. Nevertheless, signs of recovery in the tourism industry and hence the service account already emerged.

18. 18 Thousand Persons % y-o-y Source : Tourism Authority of ThailandSectoral Studies 2 Team Tel. 283-564325/06/03 % y-o-y (LHS) No.of tourists (RHS) 11- Sep SARS 2002Q1-03Q2-03Apr-03May-03Jun-03 Occupancy rate (%)60.665.441.443.138.542.9 No. of tourists (‘000)10,7992,8501,457468400589 %y-o-y7.3-1.6-40.0-44.8-50.4-23.8 Number of tourists and occupancy rate have recovered.

19. 19 Services Income & Transfers Source : BOT and constructed from data of Tourism Authority of Thailand BOP Analysis Team Tel. 0-2283-6882,0-2283-5625 Last update :23 Jul 03 Receipts - Tourism (in) - Invest’Income Payments - Tourism (out) - Invest’ Income Transfers TOTAL Millions of US$ 4,211 18,673 7,903 1,974 15,079 3,303 4,695 617 2002 - Private - Public - Private Interest 1,343 - Private Profit & Dividend 2,199 392 1,582 - Public 1,047 -206 3,432 1,001 469 3,837 650 1,524 199 Q2 1,001 294 120 349 190 1,225 8,209 3,091 874 1,350 2,470 396 H1 606 1,402 209 665 390 7,380 2003 101 1,232 404 159 250 440 61 137 233 25 134 47 1,192 Jun/p 1,431 4,778 2,090 405 700 946 197 312 401 89 316 200 3,543 Q1 -185 1,118 267 187 194 573 54 63 439 43 143 65 1,358 May

20. 20 Net Capital Flow Source : Data constructed from F.T. forms Balance of Payments Analysis Team Tel. 0-2283-6726 Millions of USD2002 P 2003 P H1Q3Q4Q1AprMay Private Sector-5,434-3,482-192-1,760 -2,7058-1,663 - FDI1,139688-210661 316-87260 Non-bank970555-246661 315-90260 - Portfolio-2,043-653-309-1,081 -55280-3 - Loans-3,844-2,019-977-848 -717-35354 Bank-1,618-552-650-416 -418-391-74 Non-bank-2,226-1,467-327-432 -29938128 - Other Bank Assets4,3331,2982,216819 -736363-678 - Other-5,019-2,796-912-1,311 -1,0165-1,296 Gov’t & SE-2,585-583-1,688-314 -190-200-220 BOT4,0323,35165616 -1,533-81,184 Total Capital Flow-3,987-714-1,815-1,458 -4,428-200-699

21. 21 Balance of Payments Billion of baht 2003 2002Q1Q2H1MayJun Trade Balance3.41.11.42.50.60.7 Exports66.818.218.937.06.5 (%Y-o-Y)(5.7)(21.3)(16.8)(19.0)(13.5)(15.0) Imports63.417.117.434.55.95.8 (%Y-o-Y)(4.4)(19.2)(12.1)(15.5)(13.2)(9.7) Services & Transfer4.21.4-0.21.2-0.20.1 Current A/C7.62.51.23.70.40.8 Net Capital Movement-3.1-4.4-0.7 Private-4.7-2.7-1.7 Public 1/ 1.6-1.71.0 Overall Balance4.2-2.11.0-1.1-0.10.9 Reserves38.937.639.3 38.939.3 Source: Compiled by Bank of Thailand BOP Analysis Team 29 Jul 03 (0-2283-5625) Note: Including BOT

22. 22 Supply Side

23. 23  % (Y-O-Y) 20022003 Q1 Q2 H1 May Jun Farm Income Production Price 11.7 0.8 10.9 18.7 34.5 25.1 35.8 22.1 3.5 15.3 8.1 14.4 4.2 14.7 16.7 15.7 18.8 17.1 Farm Income Sectoral Analysis Team 2 Tel. 283-5643 29/07/03 Farm income continued to rise strongly and was a support factor to private consumption, particularly motorcycle and commercial car sales.

24. 24 Manufacturing Production Index (%YoY) Sectoral Studies 1 Tel.0-2283-5646 1/8/03 Manufacturing production continued to expand buoyantly.

25. 25 Capacity utilization trended upward except in June when there were temporary factory shutdowns for maintenance in the tobacco, wire rod and upstream petrochemical industries. Jun 64.8 Source: BOT Survey Sectoral Studies 1 Team Tel. 0-2283-5646 1/8/03 Note : Cap U is constructed from survey data of 36 industrial categories which altogether represent 44.5% of the valued added in the manufacturing sector. Cap U Cap U (sa, 3-m ma) Jun 67.1 Capacity Utilization

26. 26 Sectoral Studies 1 Team Tel.0-2283-5646 29/7/03 Note : P = Preliminary Source : Constructed from BOT survey Weight 1995 Average 1995- 1996 2002 Year 2003 Q1Q2H1MayJun P Vehicles Petroleum Electronics Beverages Food Construction Iron & Steel Tobacco Others 10.2 7.2 6.4 5.5 3.5 2.4 2.1 1.9 5.3 74.5 89.5 65.9 82.6 40.3 88.0 64.7 79.7 78.9 54.6 76.2 59.7 50.5 45.1 56.9 60.6 53.8 71.5 65.5 78.9 59.6 54.2 82.2 56.1 61.7 56.8 78.8 66.9 78.9 67.0 55.4 49.2 58.9 60.2 51.9 78.5 66.2 78.9 63.3 54.8 65.7 57.5 61.0 54.4 78.7 68.9 80.6 70.8 56.4 46.1 64.1 65.1 63.4 80.3 71.7 78.3 67.6 50.7 40.0 58.0 54.8 42.4 75.9 Total (36 Pro.) 44.5 75.0 59.967.266.066.668.464.8 UNIT : % Capacity Utilization

27. 27 Sectoral Studies 1 Team Tel.0-2283-5646 1/8/03 Source : Constructed from BOT survey UNIT : % Top-10 Capacity Utilization Rates in Jun 2003 Going forward, industries with high capacity utilization rates are likely to expand investment...

28. 28 Source: BOT Survey Note : Cap U is constructed from survey data of 36 industrial categories which altogether represent 44.5% of the valued added in the manufacturing sector. Capacity Utilization and Private Investment Index Cap U excluding liquor (SA) PII (LHS) Index Per cent … as Private Investment Index (PII) and capacity utilization have always been highly correlated. Correlation = 0.96

29. 29 Economic Stability

30. 30 Inflation Unemployment Thousand persons Rate (%) Jul 03 Headline : 1.8 % Core : 0.1 % 2001 2002 2001 2002 2003 Internal Stability Jun-01Jun-02Jun-03 thousand persons 807641719 rate2.4%1.9%2.1% %

31. 31 Public Debt % GDP Source: Public Debt Management OfficePublic Finance Team Tel. 283-5628 08 Aug 03 50.5 54.2 56.6 54.2 53.5 54.2 57.6

32. 32 Exchange Rate External Debt Current Account Reserves / Short- term Debt Million USD B/$ Billion USD Jun = 797 (SA) 31 July 03 41.98 3.3 0.7 55.3 May 25 bsp R/P cut (21 Jan) 25 bsp R/P cut (19 Nov) 50 bsp R/P cut (27 Jun) External Stability

33. 33 Monetary Sector

34. 34 Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621 Source : The Bank of Thailand Movements of Major Currencies (Jul. 2000 – Jul. 2003) USD/EURO JPY/USD BAHT/ USD 118.66 1.14 41.78 July

35. 35 INTEREST RATES 14-day R/P Source : The Bank of Thailand % p.a. Last Update : 13 Aug 2003 Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621 MLR Nominal 12-m Time Deposit 5.7 1.06 1.25

36. 36 Sources:BOT reports and surveys, Financial Institution Policy Group Note:Including Thanachart Bank Last Update: 29 Jul 2003 % yoy Deposits Jun 03 p/ Monetary Policy Analysis and Strategy Division Tel. 0-2283-5621 Claims on private sector (adding back debt write-off and transferred loan) * claims (adding back debt write-off and transferred loan) GROWTH RATE OF BANKS ’ DEPOSITS AND CLAIMS ON PRIVATE SECTOR 3.3 1.2 Credits extended by commercial banks, finance companies, and credit foncier companies 7.3

37. 37 Credits of Commercial Bank Classified by Sectors (change from the same period last year) May

38. 38 Total NPL (Commercial banks+Finance companies) 18 Aug 2003 Bn bath Source: Corporate Debt Restructuring Group

39. 39 Total NPL classified by debtors 7 Aug 2003 Bn bath Source: Corporate Debt Restructuring Group Dec 2002 Mar 2003

40. 40 Economic Outlook

41. 41 Economic Outlook for the Rest of the Year Support factors –Gradual increase in capacity utilization is likely to raise investment activities going forward –Continued expansion in employment –Sound internal and external stabilities –Low interest rates and improvement in commercial bank lending –Rising farm income –Government measures, e.g., SME measures, housing projects for low income people, etc. Risk factors –Regional terrorist threats may delay the full recovery of tourism –Weak US dollar affects the competitiveness of Thai exports –Fragile recovery of G3 –Rising oil prices

42. 42 Forecast Summary 200220032004 GDP Growth (old) 5.24.5 – 5.5 (3.5 – 4.5) 5.0 – 6.0 (4.5 – 6.0) Core Inflation (old) 0.40.0 – 0.5 (0.0 – 1.0) 0.0 – 1.0 (1.0 – 2.0) Headline Inflation (old) 0.71.0 – 2.0 (1.0 – 2.0) 1.0 – 2.0 (1.0 – 2.0) ( ) April 2003 Inflation Report