Our external debt to GDP ratio has hit an all-time low since 1980, recording 29.4 per cent last year. Our foreign reserves have doubled within three years, increasing from 50 billion US Dollars by the end of 2005 to more than 100 billion US Dollars at present day. The amount of foreign reserves is more than four times higher than short-term external debt. This gives us an ample room to safeguard against instability from volatile capital flow and exchange rate movements which are deemed out of line with the economic fundamentals if necessary. 4  BIS Review 98/2008  Second, the government’s fiscal position continues to improve as reflected by the falling trend of the public debt to GDP. Indeed, these improvements were the backbone of mediumterm economic stability and provide much cushion against various economic shocks in the short term. They give the government the financial flexibility to execute policies that temporarily alleviate the public’s inflation burden. It is no coincidence that over the past few years, credit rating companies have affirmed their ratings on Thailand, pointing at the strength of our fiscal and external position despite the economic downturn. Notwithstanding the difficult political climate in 2006, credit rating companies did not downgrade Thailand’s sovereign rating. Although a few agencies put Thailand on a negative watch list but those were removed a few months afterward. Third, the labor market shows no sign of rising unemployment rate, something that would be expected in a worsening business environment.
Ladies and Gentlemen, At this moment, high oil prices have put both advanced and developing economies alike in a very tough spot. Unfortunately, for Thailand, when it comes to oil shocks, we are not as resilient as many other economies as our economy depends heavily on oil. In fact, Thailand’s oil dependency ratio, although has been falling, remained among the highest in the world since our logistic system has been neglected for sometime. Prior to the recent hike in oil prices, Thailand was on the path to recovery. Indeed, economic growth picked up since the third quarter of last year with an expansion from 4.7 percent to 5.7 percent and 6.0 percent in the subsequent quarters, respectively. Domestic demand strengthened; consumption, investment and imports, all accelerated while exports performed rather well. This was a clear recovery pattern. Up to the end of the first quarter, the sentiment was lifted to a better prospect for Thailand, with many expecting average 6 percent growth for this year. Unfortunately, the story did not end there. Oil prices soared again, passing the 120USD mark in May. Despite some correction last week, oil prices remain much higher than where they were the beginning of this year. Compounding this negative external shock was the return of street protests.