Thailand's Economic Recovery Far from Smooth by Phairath Khampha 15 June 2002 Thailand's current account in April dipped into the red by US$119 million (5 billion baht) since August 1997, signalling that the economic recovery remained shaky. According to the Bank of Thailand, the current account - which covers imports and exports of goods and services - went into deficit in April 2002 due to an increase in imports of consumer goods. The uncertain external-account picture emerged despite the slow but steadily economic recovery. The World Bank on June 1 upgraded Thailand's economic-growth forecast for 2002 from 3 to between 3 and 3.5 per cent. But this growth would have to be fuelled largely by domestic consumption on the back of government spending. Central-bank chief economist Achana Waikhuamdee warned that this was not a good time for the current account to fall into deficit as the economic recovery was still fragile. She blamed a 13-percent rise in imports of consumer goods in April as the main contributing factor for the current-account deficit. Imports of capital goods for manufacturing in the same month rose only 4.4 per cent. When a current account is in deficit, it implies that a country is living beyond its means. If the situation is allowed to continue Thais would have to borrow from overseas to finance their over-consumption or over-investment, which could affect confidence and lead to a currency crisis similar to what the country experienced and which led to the 1997 financial crisis, which echoed throughout the region and eventually brought about a world economic slowdown whose effects were still being felt as of May 2002. After the 1997 crisis, Thailand's current account made a sudden turnaround from a deficit of 7-8 percent of gross domestic product (GDP) to a huge surplus of $1 billion a month. This took place amid a steep fall in the value of the baht coupled with a sharp contraction in domestic demand. In April 2002, the trade account suffered a deficit of $265 million, while the services account recorded a surplus of just $150 million due to dividend repatriation by foreign companies and to Thais' spending money abroad. Previously, the services account enjoyed a surplus of about $300 million a month. Exports in April grew for the first time in 11 months by 1.1 per cent, yet their value was only $4.8 billion compared to imports costing $5.04 billion. Achana emphasised that the central bank did not want to see a further deterioration in the current account because of the fragile state of the economic recovery but could not predict if it would continue over the coming months.