News on 19 June

Financial Times (London)

June 20, 2000, Tuesday London Edition 1

HEADLINE: WORLD NEWS: ASIA-PACIFIC: Bangkok warned to push on debt restructuring BYLINE: By AMY LOUISE KAZMIN

Thailand, which formally graduated from a Dollars 17.2bn (Pounds 11.3bn) International Monetary Fund stabilisation programme yesterday, logged healthy first-quarter economic growth of 5.2 per cent year on year. However, economists warned that the country must push forward with corporate debt restructuring to avoid undermining a steady recovery.

Thailand's economy, which shrank 10.2 per cent in 1998 then grew 4.2 per cent last year, is widely expected to grow between 4.5 and 5 per cent this year. The economic statistics released yesterday by the National Economic and Social Development Board, a government think-tank, indicate the country is on track to meet that target. Driven by a 25 per cent surge in exports and a 5 per cent pick-up in private consumption, first-quarter manufacturing output grew 9.5 per cent year on year, while transportation grew 5.6 per cent.

Private investment also grew by 14.6 per cent while government investment surged 22 per cent, though that was largely due to the import of five commercial airplanes by Thai Airways.

The growth figures coincided with the expiry of a 34-month IMF loan facility extended to Thailand in 1997, after the forced devaluation of the baht pushed the country into recession.

Thailand used Dollars 14.3bn of the funds, then suspended further borrowing last September amid criticism that the IMF was "dictating" the country's economic policy.

Bangkok had agreed to wide-ranging reforms, including the passage of bankruptcy and foreclosure laws, to obtain the loan.

IMF officials have pronounced themselves pleased with Thailand's reform effort during the programme but have warned that the country must remain vigilant about pushing for corporate debt restructuring.

"There is no room for complacency," Ranjit Teja, the IMF's chief for the Asia-Pacific region, said at a recent briefing. "Nothing compares with the central issue of getting companies going again.

" Corporate debt restructuring has proceeded slowly in Thailand and non-performing loans accounted for 36.5 per cent of all outstanding loans at the end of April. Though some analysts say that there has been a pick-up in the number of cases brought to the bankruptcy court since a landmark ruling in March, small and medium-sized enterprises are still struggling and are particularly starved of resources.

"Thousands of businesses are still in crisis," says Chalongphob Sussangkarn, president of the Thailand Development Research Institute.