{
  "title": "Public Information Notice: IMF Executive Board Concludes 2005 Article IV Consultation with Thailand",
  "publication": "IMF News, October 27, 2005",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn05150",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2005-10-27",
  "sections": [
    {
      "heading": "Background",
      "content": "- On September 7, 2005, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Thailand.\n- 2004 performance:\n  - Real GDP increased by 6.1 percent.\n  - Headline inflation (period average) 2.7 percent.\n  - Core inflation (period average) 0.4 percent (within Bank of Thailand's target range of 0-3.5 percent for core inflation).\n- Early 2005 shock factors and impacts:\n  - Confluence of higher oil prices, recurring outbreaks of the avian flu, the security situation in the south, slower partner growth, the downward electronic cycle, the devastating tsunami, and a prolonged drought.\n  - Slowdown in activity and marked deterioration of the current account at the beginning of 2005; recovery signs with strong growth in the second quarter.\n  - Headline and core inflation rose in August to 5.6 and 2.3 percent, respectively, reflecting rising energy prices.\n- Monetary policy:\n  - BOT policy rate raised from 1.25 percent to 3.25 percent since August 2004, ending a three-year easing cycle.\n- Fiscal and public investment:\n  - FY 2003/04 central government recorded a small surplus of 0.3 percent of GDP due to revenue overperformance.\n  - FY 2004/05 central government balance projected to be broadly balanced, allowing for a supplementary budget of B 50 billion (or ¾ percent of GDP).\n  - Authorities announced plans for B 1.7 trillion in infrastructure spending over 2005-09; public investment projected around 9 percent of GDP (below pre-crisis peak of 12 percent of GDP).\n  - Overall public sector balance projected to record a small deficit due to higher capital spending by nonfinancial state enterprises and a lower balance for extrabudgetary funds (Oil Fund).\n- External sector:\n  - 2004 current account surplus 4.5 percent of GDP; outstanding external debt fell to 31 percent of GDP from 36 percent in 2003.\n  - First half of 2005 current account deficit US$6.2 billion (about 3.8 percent of GDP); current account improved to a small surplus in July.\n  - Baht: appreciated around 3 percent (year-on-year) against the dollar in 2004, depreciated slightly in effective terms; weakened between March-August 2005 with the deterioration of the current account.\n- Structural vulnerabilities:\n  - Banks strengthened financial positions but NPLs have yet to come down further.\n  - Thai Asset Management Corporation resolved 99 percent of total acquired assets in 2004; some approved restructurings or foreclosures remain incomplete.\n  - Corporates have made de-leveraging progress but more work remains."
    },
    {
      "heading": "Executive Board Assessment — Findings and Risks",
      "content": "- Directors commended:\n  - Prudent macroeconomic policies supporting strong 2004 growth and relatively low inflation.\n  - The role of disciplined monetary and fiscal policies and a flexible exchange rate regime in weathering 2005 shocks and enabling stronger-than-expected second quarter growth.\n- Near-term risks identified:\n  - A sharper-than-expected slowdown in partner demand or additional increases in oil prices could delay current account improvement and slow recovery.\n  - If adverse circumstances materialize, Directors encouraged allowing the market-based exchange rate and automatic fiscal stabilizers to support recovery.\n- Balance sheet strength:\n  - Substantial reduction in public and external debt over recent years places Thailand in a strong position to confront adverse shocks.\n- Exchange rate and monetary policy:\n  - Support for BOT's flexible exchange rate management and limited intervention to smooth excessive volatility.\n  - Several Directors noted that further market-led currency adjustment may be needed if external shocks persist.\n  - Directors supported BOT’s early move to tighter monetary conditions and the gradual approach to raising the policy rate from 1.25 percent to 3.25 percent since August 2004.\n  - Targeted prudential curbs by BOT were seen as appropriate to prevent excessive exuberance in some credit market sectors.\n- Fiscal policy stance:\n  - Projected mild fiscal stimulus in FY 2004/05 viewed as appropriate given contained inflationary pressures and growth uncertainties.\n  - Broadly neutral draft budget for FY 2005/06, inclusive of planned infrastructure spending, considered appropriate given expected cyclical position.\n  - Directors welcomed improvements in tax administration and recent gains in revenue collection.\n- Megaprojects and fiscal/external sustainability:\n  - Emphasis that planned megaprojects should be prioritized, appropriately phased, and not jeopardize fiscal and external sustainability.\n  - Encouragement for transparent financing, minimized contingent liabilities, adequate monitoring mechanisms, containment of current expenditure growth, and sustaining the revenue effort to ensure medium-term fiscal sustainability.\n- Structural reform priorities:\n  - Sustainable medium-term growth hinges on steadfast implementation of structural reforms.\n  - NPLs remain high; Directors welcomed measures to expedite NPL resolution and encouraged speedy enactment of legislation to replace full guarantee by the Financial Institutions Development Fund with a deposit insurance scheme and to allow state-owned AMC purchases of assets from commercial banks.\n  - Support for authorities’ actions to deal with the largest state-owned bank and call for continued vigilance.\n  - Measures to discourage speculative flows may be useful short-term but have long-term drawbacks.\n- Governance, legal, and investment-climate reforms:\n  - Importance of accelerating legal reforms to improve governance in private and public sectors and enhance the investment climate.\n  - Welcomed measures to improve accounting and governance standards and the forthcoming ROSC on corporate governance.\n  - Welcomed authorities' request for an FSAP in 2007 and encouraged faster progress with pending legislation in other economic areas.\n- Privatization and trade policy:\n  - Strengthened commitment to privatization welcomed; planned corporatization of Thailand's power company an important first step, with telecom sector next.\n  - Trade liberalization progress commended; recent bilateral FTAs could help domestic business climate and market access but should complement broad-based trade liberalization and be consistent with multilateral trade goals."
    },
    {
      "heading": "Policy Recommendations and Scenarios",
      "content": "- If partner demand weakens sharply or oil prices rise further:\n  - Allow market-based exchange rate adjustment and automatic fiscal stabilizers to support recovery.\n- Fiscal policy:\n  - Prioritize, phase, and transparently finance megaprojects to avoid jeopardizing fiscal and external sustainability.\n  - Minimize contingent liabilities and ensure adequate monitoring of project implementation.\n  - Contain growth of current expenditure and sustain revenue effort to secure medium-term fiscal sustainability.\n- Monetary and financial sector policy:\n  - Continue flexible exchange rate management with limited intervention to smooth excessive volatility.\n  - Maintain gradual tightening of monetary conditions as warranted by closing output gap and inflationary pressures.\n  - Use targeted prudential measures to curb excessive credit exuberance where needed.\n- Structural and legal reforms:\n  - Accelerate resolution of NPLs; enact legislation for deposit insurance and asset purchases by state-owned AMCs.\n  - Strengthen corporate governance, accounting standards, and legal frameworks to improve investment climate.\n  - Proceed with privatization and corporatization plans to boost investor confidence.\n- Trade policy:\n  - Pursue bilateral and regional FTAs as complements to broad-based trade liberalization and ensure consistency with multilateral trade liberalization objectives."
    },
    {
      "heading": "Selected Economic Indicators, 2000-05 (highlights and exact figures)",
      "content": "- Real GDP growth:\n  - 2000: 4.8\n  - 2001: 2.2\n  - 2002: 5.3\n  - 2003: 6.9\n  - 2004: 6.1\n  - 2005 Est./Proj.: 3.5\n- Consumption (series entries shown partially in source): 3.9; 5.8; 6.7\n- Inflation (Headline CPI, period average):\n  - 2000: 1.6\n  - 2001: 0.7\n  - 2002: 1.8\n  - 2003: 2.7\n  - 2004: 4.2\n- Inflation (Core CPI, period average):\n  - 2000: 1.3\n  - 2001: 0.4\n  - 2002: 0.1\n  - 2003: 1.5\n- Fiscal accounts (budgetary central government balance, on a cash and fiscal year basis; fiscal year ends on September 30):\n  - 2000: -2.0\n  - 2001: -2.1\n  - 2002: -2.3\n  - 2003: 0.3\n  - 2004: 0.5\n- Revenue and grants:\n  - 2000: 15.5\n  - 2001: 15.1\n  - 2002: 15.9\n  - 2003: 16.6\n  - 2004: 17.6\n  - 2005: 17.8\n- Expenditure and net lending:\n  - 2000: 17.5\n  - 2001: 17.2\n  - 2002: 18.2\n  - 2003: 16.2\n  - 2004: 17.3\n- Comprehensive public sector balance:\n  - 2000: -2.7\n  - 2001: -0.7\n  - 2002: -0.4\n  - 2003: 2.6\n  - 2004: 1.4\n- Public sector debt:\n  - 2000: 57.8\n  - 2001: 57.5\n  - 2002: 57.2\n  - 2003: 50.6\n  - 2004: 48.9\n  - 2005: 49.6\n- Monetary accounts (M2A growth, end-period):\n  - 2000: 4.6\n  - 2001: -0.1\n  - 2002: 5.1\n  - 2003: 6.3\n  - 2005 figures are percentage changes between March 2005 and December 2004 (as noted in source).\n- Balance of payments — Current account balance (in billions of U.S. dollars and percent of GDP):\n  - Current account balance (US$ billions):\n    - 2000: 9.3\n    - 2001: 6.2\n    - 2002: 7.0\n    - 2003: 8.0\n    - 2004: 7.3\n    - 2005: -4.1\n  - (Percent of GDP):\n    - 2000: 7.6\n    - 2001: 5.4\n    - 2002: 5.5\n    - 2003: 5.6\n    - 2004: 4.5\n    - 2005: -2.5\n- Exports, f.o.b. (US$ billions):\n  - 2000: 67.9\n  - 2001: 63.1\n  - 2002: 66.1\n  - 2003: 78.1\n  - 2004: 96.1\n  - 2005: 106.9\n- Imports, c.i.f. (US$ billions):\n  - 2000: 62.4\n  - 2001: 60.6\n  - 2002: 63.4\n  - 2003: 74.3\n  - 2004: 94.4\n  - 2005: 116.3\n- Capital and financial account balance:\n  - 2000: -10.8\n  - 2001: -3.6\n  - 2002: -1.4\n  - 2003: -7.4\n  - 2004: -1.6\n  - 2005: 2.5\n- Gross official reserves (end-year, US$ billions):\n  - 2000: 32.7\n  - 2001: 33.0\n  - 2002: 38.9\n  - 2003: 42.1\n  - 2004: 49.8\n  - 2005: 48.2\n- (Percent of maturing external debt):\n  - 2000: 119.1\n  - 2001: 121.2\n  - 2002: 153.6\n  - 2003: 221.5\n  - 2004: 231.2\n  - 2005: 216.1\n- External debt:\n  - (In percent of GDP)\n    - 2000: 65.0\n    - 2001: 58.4\n    - 2002: 46.9\n    - 2003: 36.2\n    - 2004: 30.9\n    - 2005: 30.1\n  - (In billions of U.S. dollars)\n    - 2000: 79.7\n    - 2001: 67.5\n    - 2002: 59.5\n    - 2003: 51.8\n    - 2004: 50.4\n- Public sector share of external debt (US$ billions):\n  - 2000: 33.9\n  - 2001: 28.3\n  - 2002: 23.3\n  - 2003: 17.0\n  - 2004: 14.4\n  - 2005: 11.4\n- Private sector share of external debt (US$ billions):\n  - 2000: 45.8\n  - 2001: 39.2\n  - 2002: 34.8\n  - 2003: 35.7\n  - 2004: 39.1\n- Debt-service ratio (percent of exports of goods and services):\n  - 2000: 15.8\n  - 2001: 21.1\n  - 2002: 20.0\n  - 2003: 16.3\n  - 2004: 8.6\n  - 2005: 9.6\n\nPublic Information Notice: IMF Executive Board Concludes 2005 Article IV Consultation with Thailand, October 27, 2005.\n\n---\n\n Content in this bundle\n\n- Pn05150tpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Thailand and the IMF\n- Public Information Notices\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn05150"
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    "Published: October 27, 2005",
    "On September 7, 2005, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Thailand.",
    "2004 performance:",
    "Early 2005 shock factors and impacts:",
    "Monetary policy:",
    "Fiscal and public investment:",
    "External sector:",
    "Structural vulnerabilities:",
    "Directors commended:",
    "Near-term risks identified:",
    "Balance sheet strength:",
    "Exchange rate and monetary policy:",
    "Fiscal policy stance:",
    "Megaprojects and fiscal/external sustainability:",
    "Structural reform priorities:",
    "Governance, legal, and investment-climate reforms:",
    "Privatization and trade policy:",
    "If partner demand weakens sharply or oil prices rise further:",
    "Fiscal policy:",
    "Monetary and financial sector policy:",
    "Structural and legal reforms:",
    "Trade policy:",
    "Real GDP growth:",
    "Consumption (series entries shown partially in source): 3.9; 5.8; 6.7",
    "Inflation (Headline CPI, period average):",
    "Inflation (Core CPI, period average):",
    "Fiscal accounts (budgetary central government balance, on a cash and fiscal year basis; fiscal year ends on September 30):",
    "Revenue and grants:",
    "Expenditure and net lending:",
    "Comprehensive public sector balance:",
    "Public sector debt:",
    "Monetary accounts (M2A growth, end-period):",
    "Balance of payments — Current account balance (in billions of U.S. dollars and percent of GDP):",
    "Exports, f.o.b. (US$ billions):",
    "Imports, c.i.f. (US$ billions):",
    "Capital and financial account balance:",
    "Gross official reserves (end-year, US$ billions):",
    "(Percent of maturing external debt):",
    "External debt:",
    "Public sector share of external debt (US$ billions):",
    "Private sector share of external debt (US$ billions):",
    "Debt-service ratio (percent of exports of goods and services):",
    "[Pn05150tpdf (PDF)](/-/media/websites/imf/imported/external/np/sec/pn/2005/tha/_pn05150tpdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Thailand and the IMF](http://www.imf.org/external/country/THA/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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