The reason is, if you look again at the characteristics and the nature of the Thai economy, and if we have asked ourselves what would we expect the impact of COVID-19 to be on the Thai economy. Many analysts, myself included, would have said we might have easily seen a contraction in economic activity of more than 6 percent. Let me share with you some numbers and just to give you a sense of why this is the case. Tourism accounts for about 11-12 percent of our GDP and we received about 40 million foreign tourists a year. Last year because of the COVID-19, we got only about 7 million tourists; that was a drop of over 80 percent in the numbers of tourists. So roughly speaking, 80 percent times 11 percent is already almost 9 percent of GDP loss. Furthermore, that calculation has not included the indirect impact both in terms of the drop in exports as the global economy was affected by the COVID-19 and the foregone losses in the income of people associated with the hit from the COVID-19. While tourism accounts for 1112 percent of GDP, it also accounts for about 20 percent of employment in Thailand. Therefore, a great portion of the income of the population was also hit. Adding all of these figures together, one might not have been surprised if we saw perhaps a double-digit contraction in GDP.
The rapid growth of recent years has brought the economy to full capacity, the unemployment rate has fallen below 1½%, resulting in substantial wage pressures in certain segments of the market. The sharp expansion has resulted in a rising rate of inflation. In the 12 months to the beginning of October, consumer prices rose by 5.3%. The Central Bank issues inflation forecasts every three months. The latest forecast was issued in July and it envisaged a 3% average rate of inflation in 1999 and a 4% inflation rate from the beginning to the end of the year. A new forecast will be issued in the beginning of next week. The deficit on the current account of the balance of payments has risen. In 1998 it equalled roughly 5½% of GDP. It is expected to be lower in 1999. During the upswing, the Central Bank of Iceland has followed a restrictive monetary policy as reflected among other things in the fact that at present the differential between Icelandic and trade weighted foreign money market rates is well in excess of 5%. The yield on 3-month treasury bills in the market is currently above 9%, and the so-called repo rate of the Central Bank of Iceland is 9%. That can be compared with the repo rate of the European Central Bank of 2.5%. Since September of last year, the Central Bank has raised its interest rates four times, by a total of 1.8 percentage points. In early 1999 it also levied a liquidity requirement on Icelandic credit institutions.