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EDITIONS
Friday, 14 February, 2003, 20:25 GMT
Thai economy powers ahead
Bangkok's busy city business district
The Thai stock market has performed well this year
Five years after the Asia crisis crippled the Thai economy, Thai consumers have never been more confident.

A report out on Thursday by the University of the Thai Chamber of Commerce said consumer confidence rose to a record high in January.

Confidence was boosted by booming exports, strong annual economic growth (5%) and recent gains on the Thai stock market.

Repayment of the IMF is an important symbolic act - political as well as economic

Thanomsri Fongarunrung, senior economist Merrill Lynch Phatra Securities

The buoyant state of the economy also allows Thailand to repay $950m of a $17.2bn loan from the International Monetary Fund on Friday.

The IMF bailed out the country after its economy collapsed during the 1997-1998 Asia crisis.

The Thai economy has enjoyed a remarkable turnaround since the Asia crisis left its economy in a state of near-paralysis.

'Thaksinomics'

"Repayment of the IMF is an important symbolic act - political as well as economic," said Thanomsri Fongarunrung, senior economist at Merrill Lynch Phatra Securities in Bangkok.

"Thailand is now strong financially with big foreign reserves and steady balance-of-payments surpluses."

The secret of Thailand's economic success is thought to be the economic policies of Thai prime minister Thaksin Shinawatra, nick named "Thaksinomics".

Thai PM Shinawatra
Thai prime minister Thaksin Shinawatra

Mr Shinawatra was elected after heavy speculation on foreign exchange markets more than halved the Thai currency, helping to trigger the Asian crisis.

In 2001, Mr Shinawatra won the election on a strong populist theme, after Thailand had to endure IMF inspections, IMF-imposed policies opening up the economy to foreign investors and a deep recession that followed the collapse of its currency, the baht.

Mr Shinawatra's party Thai Rak Thai (Thais Love Thais) vowed to return control of Thailand to its people.

Contrary to expectations, 'Thaksinomics' seemed to have paid off.

Mr Shinawatra pumped billions of dollars into small Thai villages by giving farmers debt relief, he introduced a low-cost health scheme and has promised to build a million homes for the poor over the next five years, giving the country's construction sector a much-needed boost.

Caroline Bain, senior economist at the Economics Intelligence Unit said Mr Shinawatra's fiscal injection into the economy has led to a boom in consumer spending.

Last year, sales of expensive goods shot up, helped by record low interest rates and easy credit terms from local banks, which encouraged borrowing.

Auto sales jumped almost 40% in 2002, while the housing market has also picked up.

Exports increased 5.8% in 2002 after a 6.9% fall the year before.

In late 2001, Merrill Lynch predicted the Thai economy would grow 2% in 2002.

But it actually achieved a growth rate of almost 5%..

But Ms Bain warned Mr Shinawatra's educational and health care reforms had severely increased public debt.

"That is a matter of concern. His policies have been successful in the short term, but the long term consequences of more public debt have not been felt yet."

She also expressed concerns over Thailand's export sector, which could be hit this year by the global economic slowdown while oil imports could prove costly because of booming oil prices.

Thailand is a heavy importer of oil.

Stock market

The buoyant state of the Thai economy has also worked wonders on the stock market.

The Stock Exchange of Thailand index has risen 8% so far this year, at a time when it seemed the only way for European and US markets was down.

News of the repayment of IMF-loans means Thailand is actually speeding up settling its debts.

The Valentine's Day repayment package will leave $3.85bn outstanding of the $17.2bn IMF loan.

Thai officials said on Thursday the rest of the money will be repaid by July.

See also:

13 Feb 03 | South Asia
31 Jan 03 | Business
22 Jan 03 | Americas
29 Nov 02 | Business
15 Oct 02 | Asia-Pacific
20 Dec 02 | Country profiles
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