Thailand - Current economic position and prospects

R F tT RI CT ED Report No. FE-la FThis renort was nrenared for use within the Rank- In makino it available to others, the Bank assumes no responsibility to them for Lne aCCuracy or completeness of the information containea nerein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CURRENT ECONOMIC POSITION AND PROSPECTS OF THAILAND August 12, 1957 CURRENCY EQUIVALENTS Buying rate (Iune 1957) US $1.00 u Baht 2Mo6 Selling rate ' US $1.00 . 20.77 2. RATE USED FO PUJECTIUI1NSIN THIS REPORT: US $1.00 . Baht 20.u I Baht . US $ .05 1 million Baht . US $50,000 1 billion Baht = US $50 million ABLE OF CONTIN'iR Pape No. BASIC DATA ............................ i SUM1ARY AND CONCLUSIONS ..................... ii-iii CURRENT ECONOMIC POSITION AND FROSPECMS T TUATT AITT . ..L* kJL A A UUL.M LA.. .UU .~U . ......... J-J-. IlL.1L UeeU)I~I~ V .. ............. . Production ................... 2 rureign Thade anu Baance o.f raymentS. External Debt .............. . ........ 4 .Lnternal Finance ..................... Internal Debt ........................ 7 Money Supply and Prices * .......... 7 I!. Prospects .............................. 8 Outlook for 1957 .................... 8 Long Term Prospects ........ o Agriculture, Forestry and Fisheries .. 9 Mining ...................... ..... 10 Manufacturing ........... ....... 10 Other Sectors .......... ...... 10 Internal Finance ..................... 11 The Investment Program and the Yanhee Project .......................... 13 Balance of Payments Prospects ........ l4 The Outlook for Exports ........... 14 Imports ................... .. ..... 15 Invisibles .......................... 15 Creditworthiness ..................... 15 (2) STATSTUCAL APPENDIX 1ABLES Page No. TAble 1 Summary of External National and Government Guaranteed Debt ............ 17 1-A Summary of Service Payments on External National and Government Guaranteed Debt 18 2 Gross Domestic Product by Industry of Origin at 1952 Market Prices .......... 19 3 Value of Output of Principal Agricultural Crops in 1952 Prices ........... 20 4 Production of Main Agricultural and Forestry Products .. ............. 21 5 Production of Minerals .................. 22 6 Principal Exports ...................... 23 7 Export Prices ............. 24 8 Composition of Imports ................ 25 9 Estimated Balance of Payments and Change in Reserves .................. 26 10 Bank of Thailand Gold and Foreign Exchange Assets ................................ 27 11 Government Revenue ....... ... 28 12 Budget Expenditures . ............... 29 13 Government Investment Expenditures ..... 30 1A Internal Public Debt .................. 31 15 Price Indices ..................... 32 BASTC DATA Area P001hv so. miles PonItion (19q6 stimate) 20.7 million current prices) Thtal Baht --2 billion Per Capita Baht 1,797 ($90) T,ade Statistics (1956) Totl Ixot T$3 + 4140.TtlImot $~ ili: Rice 42% Textiles 19% Onh, km or '314D +'IA-IeAn+e 1 7in 7% Machinery and Other 23% Other 51i Government Budget, 1956 Preliminary Actuals Revenue 5,065 Zxe , ULoUtz (wU Deficit Public Debt, December 31, 1956 Internal kmillions of ant) oey External (millions of dollars equivalent) 86.2 Bank of Thailand Gold and Foreign Exchange Holdings, March 31, LY7f (millions of dollars ecuivalent) 324 MoneySupply, end 1956 (estimate) (millions or bant) (,5U Price indexes, First Quarter ly>( (193 =107 Wholesale Prices 115 Cost of Living 115 Exports 81 (i) SUMMARY AND CONCLUSIONS I. Thailand's economic position is basically sound. Real output has increased by nver h% Anniillv -innp. 1941 - nnH Trn'mi.tq tn nntininp ;t nPAr1v that rate for the foreseeable future. Export earnings, which dropped by nenrlv PV bpTPPn Tq1 anr lQq) fnllrwina +h Ponlnna of the ron lEnn- virtually recovered by 1956 their record 1951 level. Moreover, in recent vp-r.q thp t-.nn.i t-An nf Pvnnr+._ has showmna hea3l fty +:and .tow ar m etnr diversification. 2. The inflationary spell in 1953-54 has made the Government aware of th nedtoexrcsemonetar, r-fan Lnd urse sond_"' _" Since that time government deficits have been cut substantially. There was e+ill ~ ~ ~ ~ I f_ -jasl mekA f + jm "10CA 1-1+ +71 n e4 l 4m-lgf4mm. rr f of of this were offset to a large extent by increases in counterpart fund 1-1 -ot, lVus M nyin, a s .m i a ~ --- ' of the m e n er va,.,wf gove. .n rn entr -yn together with the recovery of exports, a relatively stable overall financial by about 9%, which is less than the increase in any year since 1951. The *- - LA g to t e J c e s - - - 1 e% .L- I- ma.in fLaebo contrUibLL.uting LU Ui: Lnu ±I1bt: ±L1± -L7.,u a~d LU 11v~ UeL LIVI rise in foreign exchange holdings. 3. Export earnings rose by almost 6% in 1956, despite some decline in the prices of Thailand's two main exports, rice and rubber. Imports, on the other hand, rose by 10%. A considerable part of this rather sharp increase was due to a substantial relaxation of import controls toward the end of 1955. However, the resulting fall in the trade balance was more than offset by an increase in other receipts, mainly from U.S. aid; foreign exchange reserves continued to rise, although at a somewhat slower rate than in 1955. At the end of 1956 the Bank of Thailand's holdings of gold and foreign exchange were equivalent to more than 85% of imports. h. The outlook for 1957 appears relatively favorable, and the overall results, on balance, will probably not be much different from those achieved in 1956. In the following two or three years, however, the budget and balance of payments position may be somewhat tighter, as a result of expected declines in rice and rubber prices and in receipts from foreign aid. During this period it might be necessary to curtail temporarily government investment or permit some drawing down of foreign exchange reserves. 5. In the longer run, the outlook is favorable. Over the next ten to fifteen years the overall growth in national product may average 3-% to 11% per year. By about 1960 it is assumed that world rice and rubber prices will have stabilized. Thereafter, assuming monetary stability is maintaiAned, the growth in total export earnings should average about 3% per year, with smaller increases in the early part of the period and somewhat larger increases in the late 1960's. This should be ample to meet the normal import needs of the economy. (ii) fundamental imp'ovements in the fields of fiscal management and control and V.LVA.L L UJ JJCIULAL16 U.L .LILVVOV1Vi4 VS L11UJ.C CX~.Ltz; k V 11l III V will be followed through and that additional steps will be undertaken to increase may be expected in domestic non-inflationary resources to finance governmen t -investmento I. Even assuming some increase in investment resources, however, the execution of the large Yanhee multipurpose projecW would make it necessary to reduce expenditures for other investment purposes below present levels. During recent years government investment expenditures have been concentrated mainly on railways, highways and irrigation. According to present scneduLes, expenditure on some of these projects will be tapering off by 1959, when expenditures on the Yanhee project would begin to rise sharply. Thus it is probable that no major disruption of present projects would be necessary. However, the economic benefits expected from the Yanhee project are such that a reduction in other government investment would be justified in order to permit the execution of this project. Power supply has lagged far behind demand in the post-war period, and a major increase in the supply of power and efficiency of distribution seems essential for a balanced development of the economy. From the standpoint of agriculture, Yanhee constitutes the highest priority irrigation and flood control project which Thailand can undertake at the present time. 8. The service payments on Thailand's present external debt will be fairly high during the next two or three years, but after 1960 they are scheduled to decline substantially. This drop in service on existing debt, combined with the favorable outlook for increases in national product and export earnings, should enable Thailand by the early 1960's to service a considerable amount of additional debt. By 1963, when repayment of principal would begin on the proposed loan for the Yanhee project, there should be an ample margin to meet the required service payments of about 196 million rer year. 1/ After this report was printed King Bhumiphol agreed to the Government-Is e^n t -I 1 " +^ +-; a BhA u M ultC1i1 + pu rpo se.T ,Pr oje the Bhuniiphol Multipurpose Proje ct* (44%\ k -J-J fundamental improvements in the fields of fiscal management and control 8nd Jy,t ' +tT A% ...VAn . . %Ji e n.. ,- Tn mS 1Il V f all+ uala. + ,wra-Yo ~ eVif will be followed through and that additional steps will be undertaken to Vt. .5. *VJ wea..4 y4 0J6 is Wo. A5. V4C;A CJJA WVA C U 5 L V 5.LMJi is PW'.L4., o L. C L A increase may be expected in domestic non-inflationary resources to finance 7w E'Ver.n assumi,ngn soet,.n.ta.. - - -. -n -, -nn - - 4 nvest- nt es nMWOVer + In, execution of the 2arge Yanhee multipurpose project would make it necessary iou reduce expeduuivure uLoer in.MUSULMIteL01ven ypuPvoUIo vet:ow P.Luoenu -ave-soo During recent years government investment expenditures have been concentrated ma-uLALIy UI _L.LWC.yiD, IVwa.%yO &LIU ftrgaIue UPUOILuJI OLI oZAprVsu S expenditure on some of these projects will be tapering off by 1959, when nu-ures;u projeo wula vegin to rte IarpIy. _L k is probable that no major disruption of present projects would be necessary. nowever, the economic benelits expectea Irom the Yannee project are such that a reduction in other government investment would be justified in order wo permit the execution of this project. Power supply has lagged far behind demand in the post-war period, and a major increase in the supply of power and efficiency of distribution seems essential for a balanced development of the economy. From the standpoint of agriculture, Yanhee constitutes the highest priority irrigation and flood control project wlich Thailand can undertake at the resent time. 8. Ihe service payments on Thailand's present external debt will be fairly high during the next two or three years, but after 1960 they are scheduled to decline substantially. This drop in service on existing debt, combined with the favorable outlook for increases in national product and export earnings, should enable Thailand by the early 1960's to service a considerable amount of additional debt. By 1963, when repayment of principal would begin on the proposed loan for the Yanhee project, there sould be an ample margin to meet the required service payments of about $6 million per year. (iii) CURRENT ECONOMIC POSITION AND BROSPECTS To TTTn")nnTT1rr1rf 1. Previous Bank reports have emphasized the basic strength of 1inaLana ecoz1nm. Its popuaRlon o some eV millon people nas one 01 the highest standards-of living in Asia. Rice production continues to be the mainstay of the economy, as t has-been for centuriese Rice constiutCes the main staple of the Thai diet, accounts for the largest part of Thailard's export earnings, and the rice trade is one of the principal sources of Government revenue. With Burma, Thailand is one of the world's two great rice exporters. in recent years, however, there has been a gradual diversification of the economy. Rubber, tin, teak and oilseeds are of considerable importance to Thailand as foreign exchange earners. Moreover, industrial development, although still in its infancy, has recently been making considerable headway in some sectorso 2. Early in the post-war period, the Government of Thailand began to demonstrate an active interest in the overall economic development of the country, and started to devote an increasingly important share of resources to basic facilities in transportation and agriculture. Since 1950, the Bank has helped in this effort by making loans for irrigation, railroads and port development. Highway construction, which hasbeen financed to a large extent by United States aid, has constituted the other principal area of development expenditures in recent years. Power development, however, has lagged behind. 3. The general improvement in Thailand's balance of payments and internal fiscal policies and management that occurred in 195 and 1955 were described in the last economic report (AS-52 of June 8, 1956). In 1953, Government revenues barely covered the current expenditures, and investment outlays of 1.3 billion baht were practically all financed by inflationary borrowing from the Central Bank. The result was a sharp increase in the money supply and a rise in retail prices of roughly 20% despite the contracting effect of a balance of payments deficit which amounted to $60 million in that year. The fiscal situation improved in 1954, owing principally to some curtailment of government expenditures, and about half of the Government's investment expenditures were met from revenues. The remainder was largely financed, in effect, by profits from the sale of foreign exchange to importers. However, the balance of payments deficit continued in 1954 due largely to the drop in export volume and prices of rice, and between the end of 1952 and the end of 1954, foreign exchange reserves fell by about $80 million. h. During 1955 the foreign exchange position improved mainly because of a sharp increase in rubber prices and an increased use of foreign loans and grants. The volume of rice exports increased from the low 195 level, but this gain was offset by a fall in rice prices. In 1955 also Thailand completed the transition from a complex multiple exchange system to an exchange system with a single fluctuating free market rate. The requirement that part of - 2 - the foreign exchnege proceeds from exports o r!cep rubbehPr and ti n be surrendered at a rate below the free rarket rate was abolished. To compensate f-"v 4--1 I~ , f n -P 1n n I,n- nvnfj f + njrn-4 f-rnrn~ c 1linac t.h b I~rp. qlIrriontiere, portion of export proceeds on the free exchange market, the Government in and tin. An exchange equalization fund was-established with holdings of (r,f,6_ nLilliVon,JI ( ii-I Uol.larL N J 41--U ~ ope rate 4n th ec a nge.±~ mIar~ t tbe pi of preventing large daily or short term fluctuations. 5. The Government's deficit was reduced in 1955, after taking account O.L I.J. Le Lj U re ei t from tiC. Iew V-AJJI U _L-V.UD Ut .L1i _LQ_LIICL ..i 0dI-U1'. deficit increased from about 120 million to nearly A 250 million, mainly of the unificeticn of exchange rates. Prior to the simplification of the excnange systcm the profius from sales of foreign eAchangt hau, in encou, been the main source of non-inflationary deficit financing available to the Government. II. RECENT DEVELOPMENTS Production 6. Complete up-to-date statistics on production and national income are not available for Thailand. The best indicator of the growth in national output and of the relative importance of the main sectors is given by a series on gross domestic product for the period 19>1 to ly>,supplemented by tentative estimates for 1955 and 1956 (see Table 2, Statistical Appendix). This series indicates tat agriculture alone accounts for roughly one-third of total output, and agriculture, fisheries and forestry together comprise about one-half of the total. Manufacturing and public utilities together account for about 11-12%. The series indicates that the annual growth in gross domestic product in resl terms, has averaged about 4.5% over the five years 1951-1956; allowing for population growth of about 2-2% per annum, the rise in real output per capita has probably exceeded 2% per year on the average in recent years. 7. The rice crop has constituted virtually half of the value of total agricultural output. Rice production fell sharply in 1954, due to poor weather, but recovered in 1955 and 1956. The 1956 crop, estimated at 8 million tons, was almost equal to the exceptionally large crop of 1953 and was nearly double the pre-war level. Output of rubber, which is the second main cash crop after rice, is estimated at 136,000 tons for 1956, slightly above 1955 and more than three times the pre-war level. Production data on secondary agricultural commodities, such as coconuts, oilseeds, sugar cane and tobacco are not yet available for 1956. In the past few years, however, their production increased ouite substantially although they still represent a relatively small part of total agricultural output (see Tables 3 and L, Statistical Appendix). 8. Tin is the principal mineral product of Thailand. In the post-war period production has not recovered to the pre-war level. However, there has been considerable investment activity in tin mining in the past few years, and an upward trend in production has become evident in the last three years. - 3 - Production in 1955 was 255 higher than the 1952-1954 average (see Table 5. Statistical Appendix). Output of other Yretals - lead, wolfram and antimony - has fluctuated and has not shown a very clear trend in recent years. Production of lignite at Mae Moh, although still small, increased from hO.000 tons in 1955 to 80.000 tons in 1956. 9. Most of the manufacturinL activity in Thailand consists of simple processing of agricultural and forestry products and is carried on by numerous small units. Tn recent vears. a feT inaer enternrises havp hpn .tabli.shed to produce cotton yarn, gunny bags, cement, paper, cigarettes, sugar and glass. Framentary atA ndincnnt that manufacturinP nronuction hqs hpn incr-nsing. but it is uncertain whether the relative importance of manufacturing in total ntinnl nint.mt h. increnseA qince. loXC. 104Electr.cPwe rnncapiciy of pub'lic utfili ties hasz eannA vem-r slowlyA and has lagged far behind the demand for power. Most establishments have found it neca-r to install th-r n generating sets, since power supl from public utilities is not available or is undependable and expensive. The power shortage iS eviden,ced in. t-1 rt-e 4 +-". -f +V%- -I ; -;,4* ;- " i designed to discourage electricity consumption; i.e. consumers must pay a S'k _L .JLL dUU .iu U 11,Ct- -L K lA,1U IJL~ U L -racIU le~U pos-4- onU., I -A 'iU~ UII~L. L J~ ~ summarized in the following table: (in millions of dollars) 1954 1955 1956 Exports, f.o.b. 283 335 354 Imports, c.i.f. 312 321 354 Balance - 29 + lb 0 12. In 1956, Thailand's main exports - rice, rubber, and tin,-increased somewhat in volume (see Table 0, Statistical Appendix), but the export value of rice and rubber remained virtually unchanged as a result of price factors (see Table 7, Statistical Appendix). However, receipts from tin and other exports increased significantly, with a resulting increase in total export earnings. The rise of about 107 in imports in 1956 was most likely attributable to the following factors (a) the substantial easing of import controls in the latter part of 1955, (b) the rise in money incomes in 1955, as reflected by an increase in the money supply during that year by about 14%, (c) the fear that international trade might be seriously disrupted following the Suez orisis (orders placed during this period are probably reflected in the import figures for both the latter part of 1956 and the early months of 1957). 13. Jutiing from available data. Thailand was able to maintain a substantial trade surplus with the dollar area in 1956, although the surplus was orobably about 2q-30% lower than the record 1955 surplus. The primary factor in this decline was most likely the fall in rubber prices. With the sterlinL qrea the trade balance. which had already fallen sharolv in 1955. deteriorated further in 1956 due largely to a rise in imports. Thailand annpears fn have incirred a trade dfi-it. nf about 8 million in 1956. comnared with a surplus of around $15 million in 1955. 14. Despite the unfavorable swing in the trade balance, Thailand's balance otf panyments e%n crreoi,nt cont. imroed from !3aj eiit o.f aboutf Ai0 mill Ii rn in 1955 to a surplus of $7.million in 1956 (see Table 9, Statistical Appendix). ThiS wa_s Mad- pos-ible -ainly 1- A "" ein 4~ " ii- - +4^n~v ^-P TT__ mt,^nrimir,I~ aid from about $11 million in 1955 to $30 million in 1956, and a reduction in .LUJI. Vs o.k non-mone-aL~U±yr rIJU.* L k' ap- U L.uali. J.Li.kJ.uJW .LLI L.7i'- ~.) approximated the 1955 level. Capital imports in 1956 totalled $21.7 million, cn LS4.Lng~ ol Ur-awingon W -Loans k,)j 11LLLA.JV1&/ ±)ALL) _LVAc10 WJ I.L~J suppliers credits (about $7.5 million), and private capital ($3.2 million). FLepayments on foreign Loans amounted to $6 mllin.L.U1 1-. Ie gold anU foreign exchange reerves of the Bank of Taland rose by $12 million and stood at $311 million at the end of 1956 (see Thble 10, Oatis3ical Appendix). In adLiion, liaUlties to Japan under the Tnailand- Japan open account were reduced by $3.4 million. The foreign exchange holdings of commercial banks are estimated to have increased Dy my. mlill.on. At the end of 1956, the Bank of Thailand's holdings alone were equivalent to . n ad - mad e a11 more than o>s of ly56 imports. 10. Urderly conditions have prevailed in the free exchange market since the multiple rate system was abolished. There has been no indication of any severe pressure on the exchange rate or on the Exchange Equalization Fund. In fact the baht has appreciated slifhtly. The buying rate declined from 7 21.56 per dollar in September 1955 to - 20.60 in June 1957; during the same period the selling rate declined from )/ 21.73 to 20.77 per dollar. External Debt 17. During 1956 Thailand contracted approximately $17.5 million of new government or government-guaranteed external debt, including $3.5 million from the IBRD for port development, $11.0 million of suppiers' credits for paper mill and telephone equipment, and a $3 million credit from the Bank of America to the Provincial Electricity Authority. Repayments amounted to about 93.8 million, and in addition a supplier's credit of $6.8 million originally to be repaid in dollars was converted to provide for repayment in baht. As a result, Thailand's external national and government-guaranteed debt increased from the equivalent of $79.3 million at the end of 1955 to 86.2 million as of December 31, 1956. Of the total at the end of 1956, $71.1 million was disbursed and outstanding (see Table 1, Statistical Appendix). $65.9 million or 76.4% of the total debt was repayable in dollars, M16.2 million or 16.1% in sterling, 43.9 million or 4.6% through the open account with Japan, and $2.2 million or 2.5% in Japanese yen in connection with IBD loans. 18. The ecouivalent of $4.4 million or about 52% of the external debt at the end of 1956 consisted of medium-term credits which will mature in five years or less. Under present repayment schedules the total principal amount of debt out3tanding will be reduced to $33.5 million eaivalent by 1962, $15.6 million by 1966 and $.1 million by 1970. Final repayment will be accomplished in 1971. Annual service on this debt will rise from $12.2 million in 1957 (ecuivalent to about 3.6% of 1956 export earnings) to a peak of Alf.h million in 1958. It is scheduled to decline to $6.9 million in 1962. 9h.0 in 1965. and it aoroximates 3 million annually during 1966- 1970 (see Table 1-A, Statistical Appendix). Internal Finance 19. The recent development of government revenues and expenditures, as .I~1-..-rn-i nnr-mr Budget Actual th. iolo noA I oCA Government on a cash basis. Extensive governmental financial operations take place outside the buaget. noreover tere are apparently Iarge expentoure and receipt items carried in suspense each year and not allocated to particular heads of revenue and expenditure until much later. The cash deficit in 1956, as indicated by sources of financing, is estimated at about ./ 700 million as Source of Financing Millions of Baht 1. Borrowing by Central uovernment from Bank of Thailand 390 2. Increase in liabilities of Provincial nreasuries to Bank of Thailand 10 3. Decline in government cash balance at Central and Provincial Treasuries .12 Sub-total 507 b. Net sales of Treasury Bills and bonds outside Bank of Thailand 116 2. IBRD loans 580 Grand Total 703 The- nPt.iT.a+AA P-nq1 crioPi-fcz inr 10cfli nrl 10( werep Arr rn1linn nrl 34 A10O million, respectively. 21. The inflationary effect of financing $ L95 million through borrowing from the central bav-n1, i,109 6 W- of'fset +. 1r nice , 382 million in official deposits with the Bank of Thailand, other than of $ 239 million in counterpart deposits generated by the U.S. aid program; The net inflationary financing of government operations, including the draw- compared to Jt 247 million in 1955 and $ 120 million in 1954o 22. The prelimi.nary actual figures of revenue and expenditure in 1956 inuicate hat buUge revenues were originally uner-estimated ana buget expenditures over-estimated. This has been the usual experience in past years. Details are not yet available to show which items of revenue were under-estimated. However, imports in 1956 were higher than originally estimated, and it seems likely that customs receipts was the main item which exceeded une budget estimate. On the expenditure side, preliminary information indicates that there was the usual substantial shortfall in investment outlays; non- investment expenditures were also somewhat below original estimates. 23. The unification of the exchange system and the increases in the export levies on rice, rubber and tin during 19> make it somewhat difficult to compare the 1955 and 1956 revenues with revenues'in previous years, (see Table 11, Statistical Appendix). Prior to these actions the budget revenues included income which the Rice Bureau derived from profits on the purchase and sale of rice. Excluded however, were the profits accruing to the Bank of Thailand from the sale: on the free market of foreign exchange surrendered by rice, rubber and tin exporters at rates below the free market exchange rate. These profits, however, in effect were used to finance government expenditures, since the Government borrowed equivalent sums (or more) from the Bank of Thailand to finance its budget outlays. When the rice trade was returned to private hands and the multiple exchange system abolished, the new levies imposed on rice, rubber and tin, which are now included in revenues, were calculated to compensate both for the loss of income from the Rice Bureau and for the loss of exchange profits. It appears that this objective was accomplished. Revenues for 1954 may be put on a basis roughly comparable with 1956 revenues by adding the 1954 exchange profits ($ 730 million) to the revenues of that year. The adjusted 195:4 revenues would thus become A L,970 million as compared to the provisional 1956 revenues of 0 5,065 million. It should be mentioned that the income from the Rice Bureau in 195h was higher than normal due to the collection of a substantial amount of .<.a:rerars from private exporters who had failed to turn over their foreign exchange at the official rate. If allowance is made for this factor the upward trend in revenues would have been somewhat more pronounced than a straight comparison of the above two figures would indicate. 2b. The overall level of expenditures appears to have been reasonably stable during 19511 to 1956. Roughly 40% of expenditures has been devoted to external and internal securitv (including cost of living allowances for security forces personnel), (see Table 12, Statistical Appendix). About - 7 - 19% of the total was for investment expenditures in 195 and. according to provisional figures, about 16.5% in 1956. Of the expenditures classified as investment outlays in 195, amon1ngno i 99Q million, about 20% was for irrigation, 36% for highways, 14% for other forms of transportation, 12% for industry and about 18% for miscellaneous purposes (see Thble 13. Statistical Appendix). In the 1956 budget estimates, nearly 60% of investment e:Kpndit+ure w+aA +l +hc +tedtothetransprtainn categry and somewhat reduced amounts to irrigation and industry. Within the transportfl~n+atin catgor +navw,i .k ..+. susata i,nces in oulays was budgettednf+ for railways and a smaller amount for highways. In the miscellaneous in 1955 and expenditures of $ 25 million were budgetted for 1956. Internal Debt 25. During 1956 the total outstanding internal debt of the Government increased by p '02 million, and th wumoun held by tne Bauk u mhailand increased by A 386 million (see Table 1L, Statistical Appendix). A 116 million of government securities and Vreasury bills were sold outsiae ue Bank of Thailand, as compared to $ 127 million in 1955. Most of these sales have been to government entities and financial institutions, but it is significant that in 1956 when the Government offered for the first time a long term bond issue at 8%, some p 23 million was reported subscribed by individuals; this was several times the anount reported subscribed by individuals to any previous issue of government securities. Prior to this issue the highest rate paid by the Government had been 6%. The proportion of total debt held outside the Bank of Thailand increased from 7.7% at the end of 1955 to 8.9% at the end of 1956. Money Supply and Prices 26. The fiscal operations accounted for only a small part of the increase in the money supply in 1956. On the basis of somewhat deficient data (notes in circulation outside the Bank of Thailand, plus total sight deposits of commercial banks, minus cash reserves of commercial banks) it appears that during 1956 total money supply increased by about $ 600 million, or 8.7%. This compares with increases of 11.4% in 1954 and 14.1% in 1955. It appears that as much as 85% of the increase in the money supply in 1956 may have been attributable to the increase in net foreign assets of the Bank of Thailand (W 311 million) and commercial banks (about $ 190 million). The remainder of the increase in the money supply was probably accounted for by a modest rise in private bank credit; the increase in private credit was apparently much less than the rise of $ 720 million (32%) which took place in 1955 and significantly smaller than the increase of $ 300 million (15%) in 1954. 27. After a period of relative price stability in 1954 the domestic price level increased during 1955. In 1955 the wholesale price index averaged some 15% above 195h. This was due mainly to the rise in domestic prices of rice, rubber and tin which took place during that year. In 1956 the prices of these commodities levelled off and the nverage wholesale price index rose by less than 3%. The cost of living index, which is heavily weighted by rice, has followed the wholesale price index with some la (see Thble 15. Statistical Appendix). - 8 - III. PROSPECTS Outlook for 1957 28. The outlook for 1957 is relatively favorable. It appears reasonable to assume that total exnort earnings in 19q7 will be about the same as in 1956. The value of rice exports should approximate last year's level. The volume of rinp exorts in enrlv 197 ch.tqnti11v Pw-.iod Pyrnrtq in thp comparable period of 1956, but the total for the year is not expected to Peeed areatly the 1CA vrlnme of 1_9M_0 to%ns. rnnrt nrinq in the first quarter 1957 closely approximated the 1956 level. Eventually, however, world reprices arbxece o decline, and some decline- __ e-- . end of 1957. Rubber export prices on the average are likely to be lower in 157 than in 19,6, -adhs i~expectd torduce earn.ings from rbe xot below the 1956 figure. In the first quarter of 1957, earnings from tin exports due to higher average prices in 1957. Earnings from tin exports for the the relatively high March level. Other exports, such as oilseeds, coconuts, 4%.-,C-xveoca anU wouu proutU WLj, prUv.aL.LuLj'.LnJy conu.Llae vIuLt; UpWL.L'u 4a.71cu U.L vlt past several years and thus offset the decline in rubber export earnings. Assuming that the monetary situation remains relatively stable, imports Should not exceed the 1956 level and may decline somewhat, in view of the build-up of inventories which took place following the Suez crisis. 29. Government revenue in the 1957 budget is estimated about 370 million higher than in the y>9o budget. Compared to the 15o5 provisional actual revenue, however, the increase is only 0 55 million or about 1.1%. Ordinary expenditure is estimated to rise p 420 million above the 1956 budget estimate, and investment expenditure is budgetted at about the same level as in 1956. The overall budget deficit is thus slightly higher than in the 1956 budget. As in past years it seems likely that the new budget contains considerable elements of under-estimation on the revenue side and over-estimation on the expenditure side. The cash deficit will probably approximate the 1956 cash deficit, although this could doubtless be reduced through curtailment of spending on low or doubtful priority items in the budget. A cash deficit of the same magnitude as in 1956 would most likely involve a larger amount of inflationary financing, because it is expected that the increase in counterpart fund balances, which was a major anti-inflationary influence in 1956, will be much smaller in 1957. However, in view of the high level of stocks of goods in the country at the'end of 1956, it seems quite possible that there may be some reduction of stocks and a contraction of private credit which would offset to some extent the inflationary tendencies resulting from the government deficit. On the whole the financial and monetary situation in 1957 should not be much different from 1956. Longer Term Prospects 30. In the foreseeable future economic activity is likely to continue to be centered primarily around agriculture. Fisheries, forestry and mining -9- will also continup to h inortint.. A onnsiVerable further growth of light manufacturin: can be expected, although this development is unlikely to be arAnt Pnoiah tz n1Atrr +nlipn t t-nt1i+innn1 r1i.qt.ribuniton of rpqoinoens or incomes within the next few decades. In total, a fairly rapid rate of gVroth* in nat-iinal outputf e%f' parhinps f Jtoqi nai- xranr nnn ~ expected during the next ten to fifteen years. Agriculture, Forestry and Fisheries 31. The medium-term prospects for continued expansion of rice production a. ~ ~ 1 CV aLZ O *± ~ 'A.t J. VLUX J.'. L LI J .J . 3 Lt tJ.' J --Y0 - -" --' - -' extend irrigation to nearly 1 million acres of arable land - nearly 10% of the AJ~.a4 . J.L __LCX114.IU_ VW L1~ . JiId L.L . L1.LLrt%.L%JL1IJ.LUJC VU V-Vlj d. 14 LLU I Yanhee project woad contribute further to these irrigation possibilities by prouv.U.LuA8U ULA) u. wa'- ov-L U V unger p-.3u u.-u 4nV -eate 1 u also control floods. The great part of this area is already cultivated, and accounted for 1. millon tons o0' paddy or .oouU CU/ o. Loal rAce prouuoU n in 1955. The increase in yield per acre from irrigation is expected to result in a steady growtn in total outpuT to about 2.1 million tons by 170. A more moderate rate of increase in other areas is also expected to follow from the use of higher yielding seeds, and, to a lesser extent, from an extension 0f land under cultivation. The growth in total output is projected at an average rate of 2.> per year - which is almost the same as the growth rate since pre-war. This would bring total production to some 10 million tons of paddy by 1970, as compared to 7.4 million in 1955. 32. The prospects are also good for a continued increase in rubber production. A program of new plantings has been started, and at the same time older trees on present rubber holdings are being replaced by higher yielding varieties. Assuming this program is continued, it seems probable that production will grow by some 2% annually between 1956 and 1965 and increase thereafter by perhaps 2.5 or 3% per year. 33. Output of oilseeds, sugar cane and other crops are likely to grow very substantially. Government policy has been encouraging the development of such crops particularly for dry season planting in rice areas. This program has had some success as indicated by the growth of output since 1950. The possibilities for dry season planting will be somewhat improved by the Chao Phya irrigation project and would be greatly augmented by the Yanhee project. 34. lbak has been of considerable importance to Thailand's economy, both for the domestic market and as an export. Production expanded steadily in the post-war period until 1954, but at a rate faster than the growth rate of the forests. As a result, production has been declining since and is expected to decline by another 60% between 1955 and 1960. On the other hand, there has been a steady increase in production of other forest products, which are more important than teak domestically (having a total value three times that of teak), but which have a less important export market. - in - 35. The volume inrrense in the fish catch avernged 64 a year between 1950 and 1954, and indications are that this rate has continued in the past two venrs. Thailnnr is annarently rich in Pishery resources. but Incks the trained personnel and capital to exploit them adequately. There are reports that thp novernment is cnnidering nopning anstal deen ;a fishinp to foreign investment. On the basis of these indications, a continued increase in the ouintpu o-P ficzherieq at. t.hea crate as+on; in -recentF yearsq Tnay bep nrnij-tP.r Mi ni no, 31A TA i output accou^intsc for roui-ghly% hlJf thea varlu ii radde byv thi cz or. Feserves of tin ore deposits are good, and production could probably continue to exadconsiderabl y for the next ten. or .-ifteen. year In t, ' it appears that production may actually decline in the next year or two because the International Tn Agreement which Thailand is about to join. Thereafter, P ~., 1JUU t'Lil al d U . APUL UO Iiiday L) U _-q:)Vk'Lx-'.u t% f.ul' -L1 OLUp 1vL wl .JJ V consumption, which is projected as expanding by about 2% a year. 37. Output of other metals - chiefly wolfram - is expected to rise moderately in the f'UtureU, bu t -W Ill cotneto- be s- i-m-pOrtLan th LUian tino. Lignite production at Mae hoh is expected to double in the nekt two years 1rom ou,UU tons in L>fo to LU,uuu tons in I>I0. Planufa cturing 30. Recently, a few fairly large enterprises have been established to produce cotton yarn, gunny bags, cement, paper, sugar and glass. Capacity is currently being expanded substantially in all of these industries. ne planned expansion of output will significantly reduce or, in some cases, eliminate import requirements for these commodities. Apart from these areas of manufacturing, an increase in the productivity of rice milling should result from the Government's policy of making modernization loans for this purpose, while output should also rise in other food processing industries, some of which (e.g. tapioca, fish and livestock products) have shown appreci- able export possibilities. The development of Yanhee power potential should significantly facilitate further industrial growth. Other Sectors 39. Activity in Government construction projects will probably continue at a high level during the next several years at least. Moreover, large projects for the development of the highway and railway systems have been undertaken in recent years and are still under way. As a result, substantial increases should take place in the contribution of the transportation sector to the GNP. 40. It may be assumed, in general, that the rate of output resulting from the increases in the sectors described above will largely determine the growth rate of the private service sectors. The provision of government services should also rise steadily, while in the field of defense stability may be assumed. - 11 - Internal Finance _l Over th nnnt few vears, the Govnrnment has shown n growine recognition of the dangers of inflationary financing, and considerably more re+raint hnc hpnn nnnliprl thnn -. Ptiepnt. nrinr fn lt Rfnt1v. the Thai Government has taken certain initial steps renuired for a more fundamental rnn-rn-ftraml n + 1v n Y) r rn1 n tn nn , rlP <-n I~ nATn--4c+rn+Ae,n On +nt11,0PIVIZ advice the Government has engaged an economic adviser who took up his dutLes 1a st yer,, a enA d Svi n- +1 h- n I-c S~a 'kn rl" w_1*_ ,-v- .,-41-~r' ori ,i-nr. n,.~n investment budget for 1958. A group of consultants has also been engaged to study th,- fi;scal1 admiJnistratio-n and make re con-~nda t"o- for imrmen ---Ti addition, the Government requested the Bank to send a survey mission, which 1."a recel.J .y begun U.LwoJ.L L% to expect that Thailand's fiscal and monetary policies and management will 4. OIU L111YUV:: LU-U 1I±u~I~i I 4± -h year a ~LdU ± I-L __2l~. -3 A-41-14'1LU4 coutinue U -I-uw -m ---vment _Lu tone: yout-, al U .U a.La iz y -L: JLLLU .u jit- uum cu non-inflationary sources of finance should rise at a modest rate and Thailand snouu ve aL.L' LU I±inaceUt a ±ZtaUaIe JIve1outnt1ll prugrai wmaic IuanU.L11Lr reasonable stability. 3. During the next two or three years, the overall level of government revenue is not likely to increase substantially, because it is estimated that export prices of rice and rubber may decline by about 15% to 20% from recent levels (this assumption is discussed in detail in the section on balance 0f payments prospects). In this event, export levies on these commodities would have to be considerably reduced. 44. In the longer run, however, it should be possible for the Government to increase its current revenues abstantially in order to further basic development. The Government is faced with considerable political and administrative obstacles in its endeavor to increase revenues from direct taxes. It is reasonable to assume however that progress will be made in overcoming these difficulties, and after a few years receipts from this source should begin to accelerate. As for other revenues, it may be assumed that over the long run they will grow in accordance with the general expansion of economic activity and that, in addition, there will be a moderate increase in the efficiency of tax collection. As a long term trend, it may be conservatively estimated that total revenues will grow at the same rate as the national product. 45. Regarding current expenditure, non-defense expenditure may be expected to rise by some L-5% per year, since there will be a need to expand basic services in health, education, etc. Defense expenditure should remain app oximately stable. 46. On the basis of the above assumptions, it may be expected that the Government's current surplus will decline in the short run from the 1956 level of about $ 600 million, with revenues tending to be stable and current expenditures gradually increasing. After a few years. however, the surplus should begin to increase again. - 12 - ),7. Aciip frnm thz rrnt br Trnin_ fhp mnin q)nPP.q nvnil,blr for non-inflationary financing of government investment will be borrowing from the nnhli, and fraen aid mnA fna lans. Tn addiAinn. given a reaonabve degree of overall monetary restraint, a modest amount could be borrowed from the Bank AfF Thni I nnA .A +htrif 'On+A na 'ye min i nfl0 +Annyrnrou 148. he Covment I.- to date been able -o borrow from the puli -o]. to a very moderate extent (an average of about / 120-125 million in the past 'Mr s 1, -f I. .a, A Va, a e An , - a ,' _a- -P- " 4 -, art .- r,nA" +In 4 n A^ii- and in view of the greater efforts now being made by the Government to increase sals o bond t-~-O n diVriua,10 and.. I., P'4 ,,--1 ~4~ .,-n 4+I ..,'v.' UJ. IJUMSO L* tuuLvtua ao a±± *x a.±.x . LO 1J tLL L4Lk410, LU SO 11 I.~afCM-- to assume that this figure could be increased to around 0 300 million over +1 - 4. 4 - llt :laJ.aue suUsUUaRL LUIUJoLUlOc LU DLAND VaviuJl 1U 1id-Lilu uuut foreign aid and loans already committed. These will make a substantial contriuuion t( Ute Linancing of ialand's inVestmenU program in the netA few years, quite apart from probable new commitments. In the foreseeable future there is every reason to believe that Thailand will continue to receive U.S. aid, although new obligations may be somewhat below the recent level (in the past two U.S. fiscal years ILA has obligated Ppproximately T3> million per year in grants and loans to Thailand). Moreover, as the present medium-term foreign debt is retired, a margin will become available for a moderate amount of new Government borrowing in addition to the proposed loan for the Yanhee project. 50. The extent to which the Government can safely borrow from the Bank of Thailand is related to the amount of increase in the money supply which can be sustained without creating inflationary pressures. It is estimated that Thailand could sustain an increase in the order of 7-9% per year without encountering serious price instability or pressure on the balance of payments. About half of this increase would be absorbed by a growing need for funds corresponding to the growth in real output of the economy - projected at about 1% per year. Another important part would be absorbed by the expansion of the money economy. This element has been of considerable importance in past periods, and while it is difficult to make any precise allowance for it in the future, it would probably account for most of the remaining increase in the money supply, so that the effect on the price level resulting from these assumptions would be small. 51. Starting with the money supply at the end of 1956, estimated at about 0 7,500 million, a rate of increase of 7-9% would imply an expansion of about $ 600 to $ 700 million annually over the next few years. After 1957, when bank credit is expected to remain stable or perhaps decline, a normal expansion of private credit might add about 0 300 to $ 400 million per year to the money supply. This would leave a margin of about A 300 million per year which the Government could safely borrow from the Bank of Thailand. 52. In summary the resources available for financin7 government investment over the next five or six years, aside from the proposed loan for thp Ynnh(A nronet, are AnPected to qvPrAer abont 3 1-200 million ner year. - 13 - Source of Financing (millions of baht) Current budget surplus 200 Borrowing from public 300 Foreign aid and loans 400 Borrowing from Bank of Thailand 300 1,200 This aim is slightly above the recent level of government investment outlays, taking into account the amount of U.S. aid for development purposes which is excluded from the budget data (see Thble 13, Statistical Appendix). 53. The above projection is intended only to indicate the probable average level of resources likely to be available over the next several years. Substantial year to year variations from this average might well occur. In nrticular. dnrinq the next two or three years. the available resources may be somewhat below this average. It is therefore possLble that. inless foreign Pexhann reserves are drawn down some temnorary reduction in investment expenditures from the recent level may be necessary. 54. Finally it should be mentioned that there is always the possibility tha-fretn idmiht be substantiallyc__ tailed, alhougoh inlr-tP earlier this is considered quite unlikely. In this event Thailand would be faned %i+Int the% chMo of' miut-4ng i nvtmen shaM+ li rp-l y o%r n IIow.T;ino CP n +A- tIa fall in foreign exchange reserves or a combination of these two courses. ThaW, n d'S,AJ fo.-reinarl!fa VbaevflT alrn .1.+ tlrh he rvfloan-V, nVrfk considerable draw-down might be justified in order to prevent a drastic cut in investimen-t. HWever,_hethr or not such actiJon wV,o-l be de, A-sirable coil only be determined in the light of the then revailing circumstances. The Investment Program and the Yanhee Project 55. It -is estimated that the Yanhee project and necessary investment in related lfacilities would absorb about p L,LeU million over nere neSi x years, exclusive of a Bank loan to finance the foreign exchange costs of WIe projece. Thi. tota would represent about L1 of the tta.l fnancia l resources expected to be available to the government ( 7,200 million) for investment purposes during tU per11ou. rApeUaU.U1u'e ur Ultner ±JaVe UncUllel purposes would clearly have to be reduced below current levels. During recent years, by far the major part of development expenditures have been concentrated on railways, highways and irrigation. According to present scnedules, expenditure on some of tnese projects, particularly the 3a rge Chao Phya irrigation system will be tapering off by 1959, when expenditures on the Yanhee project would begin to rise sharply. ius, in all likelihood, there would have to be no major disruption of present investment projects. In any case, however, the economic benefits expected from the Yanhee project are such that there is no doubt that a reduction in other government investment would be justified in order to permit the execution of this project. Power investment in Thailand has lagged far behind demand in the post-war period, and a major increase in the supply of power and efficiency of distribution seems essential for a balanced development of the economy. From the standpoint of agriculture, Yanhee constitutes Thailand's highest priority irrigation and flood control project which can be undertaken at the present time. - lb - Balance of Payments Prosnects 5,*6. fl)p.qit o q?n Pmynr,tP ri.q in Pnrft volume,- P.nrninagq fromn P-Ynrt,.: are likely to remain relatively stable during the next two or three years, bp f.q isp n? t. Pp nr-tnti nn f.h-nt n,vrl rl ricep nc nrihpr ri p.vi~ Irip. r.1 i np considerably below present levels. In addition, it is estimated that Ai qhiTrqPmP_nt.. inrltmr fn-rpi cn nAiand loanns -w.T1 Iqa "a -h e,v+.mrnnI ip h f. service will reach its peak during this period. Moreover, after 1957 imports will nrnhnhlitr i-nhr---ncn. Pv nhi,+ 10A) hirmntr " + io ncamnA +ihn+. r awn rubber prices will have stabilized, and it is also assumed that receipts from fo-eign aid and 1^vm v.411 Anm n1s+4t1-r e. Af+v +h.,+ +niVi monetary stability is maintained, export earnings should begin to increase at to meet the normal needs of the economy, including a moderate investment .L I=~ %J " . U U L U1ZA1V , )! . -ve U r nX ew years 1t is a5umela La 1 race ana, ruoer price( will decline by some 18% and 15%, respectively, from 1956 levels. The chief considerations on whicn these forecasts have been based are: (a) Most of the rice-importing countries have expanded domestic production of rice and at the same time substituted other grains (chiefly wheat) for rice because of relative price advantages. As a result, the rice import market is growing at a slower rate than export availabilities. Thus, the only plausible prospect for expanding the volume of rice sales appreciably will be for prices to decline to about $100 per ton. Thailand's rice production is expected to increase somewhat faster than population growth, so that a gradually rising volume will become available for export. Rice exports might well increase from about l.3 million tors in 1956 to 1.7 million in 1965 and 2.0 million tons in 1970. (b) For rubber, world demand is expected to be sufficient to absorb growing quantities, but only if prices drop over the next few years to a point where they are competitive with synthetic rubber. From developments during recent years, it seems probable that synthetic will be substitutable for natural rubber in many of its present uses, and will be better than natural rubber in some. Thus, natural rubber cannot remain for long much above the point at which synthetic rubber can be produced at a reasonable profit. This is judged to be approximately one-fifth lower than the natural rubber price in 1956. In the case of Thailand a somewhat smaller reduction may be necessary on the consideration that the quality of Thailand's rubber output can probably be improved somewhat more rapidly than in other countries over the next few years. The quality of processing in Thailand is apparently significantly lower than elsewhere at present, and the Government is taking steps to improve it. The volume of rubber exports should rise approximately in step with production, i.e. about 2% annually until the mid 1960's and 2*3% thereafter. 58. The quotas under the International Mn Agreement are expected to be applied sometime during 1958. and at that noint. Thailand's tin exports will have to be cut back. Prices are expected to drop slightly from the 1965 level. - 15 - In the case of teak,. export volume is expected to drop by even more than the 60% decline expected in production. Only a moderate increase in teak prices is assumed. Burmese exports of teak are exrected to increase by about the same amount as the decline in Thailand's exports. 59. Other exports, on the other hand, have shown a strong tendency to increase in reent. vers. nnr thrp smP Tn hp a rizqnnh1 nrnnrt. thqt this tendency will continue. The most important components of this group are! ni1.qf.P1 qnrl vegeableh1 oils,_ Inn qPPr nnri qpln wii n-r1iint-q other than teak, tapioca and livestock products. 60. Over the longer run, say during the decade from 1960 to 1970 the in the early part of the period and somewhat larger increases in the late 1 4-- - rI 41 3 I %_1_L I jiu P& U, JuictullWu 11ato ev-Ldence d -a L&Ll-y 11LV,41 LLILIL LL ± for imports. Given monetary stability, the trend of incomes from export products largely Uuminates the eConomy. herefore wiU te use of tarif 1e and exchange rate flexibility within reasonable limits, Thailand should normally e able to live within her foreign exchange income wathout reliance to any significant extent on direct import controls. This is the general pattern which may be expected over the long run. Inere is, of course, inevitably some lag in the response of imports to a change in income. Moreover, special circuLUsances may temporarily disturb tnese general trends. In 1957, for instance, despite a rise in foreign exchange income during 19_, imports may be expected to level off because of the accumulation of stocks in the past year. Some further rise in foreign exchange holdings may thus take place in 1957. In 1958-59, however, foreign exchange income is likely to decline but imports will probably tend to rise on the basis of 1950 and 1957 incomes. It is possible that some of the recent accumulation of reserves will be drawn down. Invisibles 62. Thailand's net deficit on invisibles is likely to rise slowly in the future. It is assumed that net payments for services will increase gradually while payments for non-monetary gold should decline, mainly as a result of quota limitations imposed by the Government. Creditworthiness 63. Thailand's basic economic position is rather strong, and the outlook for growth in national output and export earnings is favorable. The main element of risk is whether the Government, through improved methods of fiscal management and control and better priority planning of investment, will manage to keep its spending within the limits of the resources likely to be available to it. Improved methods are also needed to control private bank credit, since at times in the past, expansion of private credit has introduced a considerable element of instability. The Government in recent vears.has demonstrated a - 16 - willinpnpss to fqn thpsp ornhlems. Initial stens have been taken to brinz about some of these necessary fundamental improvements, and the fiscal and monetary vituation han in fact imn-rved conidernhlv in the niqt -To or th ree years. It seems reasonable to assume that the Government will follow through to achieve further progress in these fields. 64. The service payments on Thailand's present external debt will be mainly due to repayments on outstanding medium-term credits. After 1960, 1uwvV66. n'si onu ex-ivac*- py-u are s-o1g cue ueuo .1~~~ , IAD LalJ. Ut:;LJ 1' t-3 V1L3 CE l 1111=- U J. -JLotult±1 UtULJU Ci ~ '.11 UUJ_ U IU0 decline quite rapidly. This drop, combined with the probable rise in cxpurt eur unin, uulu pruvide a margin vy the :&.-i . er OUSy V1 o usenV±LX1i1E a considerable amount of additional foreign debt. By 1963 there should be an ample margin to meet service payments of about lib million annually on the proposed loan for the Yanhee project. The present distribution of Thaliand's exports, wit a substantial volume ol rubber and tin going to the dollar area and rice predominantly to the sterling area, is not expected to change significantly in the future. Consequently no special currency problems should arise in servicing foreign debt. - 17 - Trhhlp 1 .qTIM!MtY PV r)TTMRAT .AT nt,T. PN-) MOVE7M QVNT TMAA ATTERn M)TPr 4m +V-- -1-A --P TT Q A in - 'I4rwI --+ l (in~~mon thuend r4 ce n-~ tv-~ I.L% UctL 1:3 uu L1cj FJ. u uLLL u JJ u Uu CC UJjvul viU@U Disbursed and still outstanding 71,11 2.0 Undisbursed 15,106 17.52 U.S. Dollars 65 862 76.41 Privately-placed debt 3=_ 37762 Suppliers' and bank credits 31,16 36.12 Disbursed (281176T 7276T Undisbursed (3,000) 3.A8 Participation in IBRD loans Without recourse 1,289 1.50 Disbursed 70) 0.81 Undisbursed (589) 0.69 Loans held or guaranteed by IBRD 32.722 37.95 Disbursed 21,205 27.9 Undisbursed 11.q17 11.16 Tnan. held hv Eport-Tmnrt Rnnkb 724 n 8L Prminrlc qfwrlira, I) 99P IA_Kn Publicly issued bondd 3 .07 j+a A Atey+ 0 'aHe 1db 77 Loans held by IBRD 2,293 2.76 Japanese Yen 2 161 2.50 -apanese Open Aovunt-Suppliers! Credit 3,949 h.59 a/ ~Xcludes $0,000,000 ICu loan of April 26, 156 repayable at Taland's option in baht or dollars, and a $6,759,000 suppliers' credit to the Thai Government (Ministry of interior) for equipment for municipal water supply which was originally repayable in dollars but whose terms have since been changed to provide for repayment in baht. b/ Does not include two Export-Import Bank loans to private companies amounting to $1,332,000 as of December 31, 1956. c/ Only about $821,000 of this was held outside Thailand. Source: IBRD Statistics Division. - 18 - Table 1-A. SUMEARY OF SERVICE PAYNEN3TS ON EXERITAL NAITONAL AND 1TI TVERNuTI P H A .(MA LTED . (as of December 31, 1956) (in thousands of U.S. dollar equivalents) 1~1 M . - 11 T LUJ.. 1/ 04_ -. L,±V i_J yU t T o 00 0 I- 1958 15,372 3l,624 2,714 1,034 1959 13,3 8,613 2,162 1,073 1967 3,26 2,369 1715 157 1961 3,222 6,92 1,173 1,50 1962 6,874 5,504 653 717 1963 6,517 5,0)7 653 717 1964 4,39)4 3,032 6)45 717 1965 W,oM 3,029 259 717 1966 3,631 2,698 216 717 1967 3,254 2,366 171 717 1968 3,222 2,33h4 171 717 1969 3,189 2,301 171 717 1970 3,189 2,301 171 717 1971 1,128 1,057 71 - 1/ Excluding payments on $10,000,000 ICA loan of April 1956 and a $6,759,000 .supplierWg-redit n0wprepayable-in baht. 2/ Mainly repayment on suppliers' credit under Japanese open Account and Japanese yen in connection with an IBRD loan. Source: IBRD, Statistics Division. - 19 - fROSSYoMESTEC PPROMUT PV TUTYp nFlP Arr iocT92 MAPWET PRTIES 1951 i1952 1953 1954 1955 1956 Agriculture 11.9 11.5 13.1 11.8 (13.5) (14.2) Fiseisl,- -1 .3 I. "i1. - 1. (1.5 (1.6) 4 Forestry 1.3 1. 1.4 1.5 (1.5) (1.5) Manufactu,iring and Construction 0.5 0.9 0.9 0.8 T ranspor tPaÆ tion and Communications 1.0 1.2 1.5 1.7 (1.8) l"-olesale and retail trade and other services 8.1 0.8 _9. 9.5 _ Gross Tjomestic Product 28.2 29.0 32.2 30.9 (33.5) (35.0) Source: 1951-1954: National Economic Council of Thailand. 1955 and 1956: Estimates based on partial data. Thble 3 IN 1952 PRICFS (billions of baht) 1950 19 51 -1952 195 3 19 5 4 1955 1956 icez.20 .2 5b6 6.30 1.30 5.70 .10 Rubber/ 1.21 1.1 1.06 1.04 1.28 1.bO 1.45 Oil seeds.1/ 0.20 0.26 0.26 0.26 0.31 0.32) (0.64) Sugar cane 0.08 0.12 0.15 0.18 0.24 0.27) Total of above 6.69 7.18 6.53 7.78 6.21 7.69 (8.19) Figures relate to crop year beginning in yepr indicated. a' valued at domestic price for paddy and thus excludes export duties which are included in the figures for agriculture given in Table 2. These duties correspond roughly to 15%o of the value of output. b/ Valued at export prices, including export duties. c Peanuts, soybeans, castor beans and sesame. UUV meLrIc "one] 1951 1952 1953 195h 1955 1956 Paddy 7,325 6,602 8,238 5,709 7,712 8,00 Rubber 11 100 98 120 133 136 Sugar Cane 1,291 1,076 1,820 2,437 2,699 Raw Cotton 26 24 26 23 25 Coprac/ 122 126 152 207 224 Peanuts 76 76 78. 92 94 Soya Beans 21 21 20 21 20 Mung Beans 26 24 26 28 3U Sesame 7 9 9 10 11 Maize 42 45 51 62 67 Castor Beans 12 10 9 16 16 Tbaco42 1i2 50 53 56 75 n k/ % 261 339 ~ c W830 3C a/ Preliminary b/ Exports c/ copra equivalent of coconuts produced d/ Thousand cubic meters - 22 - 'qwble C5 PRODUTTON OF KNERAS (iong tons) 1952 1_953 1951 1955 1_9_5_6a_ Tn10.0 10.1 9.8 11.0 12.5 Lead 2,421 7,834 11,478 12,314 8,333 Wolfram 1,601 1,595 1,087 1,126 1,165 Antimony 137 90 139 48 63 a/ Prelininary b/ Thousand long tons Source: Tin - International Tin Study Group Lead, Wolfram- and Antimony - Government of Thailand, Department of Nines. A. Value (millions of dollars) 1st ruarter 1954 1955 1956 1956 1957 Rice 146 148 137 32 48 Rubber 44 8M 84 22 20 Tin Ore (72% 18 21 25 6 6 concentrate) Other 75 82 99 23 28 Total 283 335 354 83 102 B. Volume 1st Cuarter 1954. 1955 1956 195 1957 Rice2' 1,001 1,2L8 1,266 290 441 Rubber Y 130 132 136 35 0 Tin-2 13.9 15.7 17.6 4.1 3.6 a/ Thousand metric tons b/ Thousand long tons Source: IhF, International Financial Statistics for value; Bank of Thailand. Current Statistics for volume. 01. C L4 - Table 7 (1953 - 100) Rice Rubber l1n T)ecember 1954 96 87 92 December 1955 75 186 97 March 1956 68 143 89 June 1956 66 115 94 September 1956 70 125 1o December 1956 67 165 101 March 1957 68 126 145 Source: IMF. International Financial Statistics - Index C - 25 - kmillions of baht) 1954 1955 1956 Anount Percent Amount Percent Amount Tercent Food 6o 9.1 618 8.3 572 7.6 Mineral Fuels, Lubricants and related materials 570 8.1 685 9.2 775 10.2 Chemicals 526 7.5 577 7.8 652 3.6 Textiles 1,40 21.0 1,66 19.8 1,425 13.8 Machinery and Transport Equip- ment 1,388 20.0 1,367 16.4 1,511 20.0 Miscellaneous (esti- mated) 2j484 34.3 2,702 36.5 2,636 3.8 Total 7,022 100.0 7bl! 100.0 7,571 100.0 Total in millions of dollars (312) (321) (354) Source: Government of Thailand, Customs Returns for baht figures. Dollar figures for 1995 an&.1955 from IMF and for 1956 from Bank of Thailand. 'r r nr '1 T r"% n T Ai «Nt-r ~ . ^r' "ir. 't, -r' rT r fY Am , "71 CIý ýtCT'DTTr1 2r,) I Lr± J 2fi~ l-Til11) 1X, U L LA-Ii'2,V4O ýý_ [J Uæ U J .L4~~1~J~. I L.L-LQ iO C) . u.a. UQJ_La.Uti Goods Exports f.o.b. 283.4 33>4.9 35I4.4 imports c.i.f. 311.7 321.1 35b4.7 D-ade balance -28.3 ;ý--1.8 - 0.3 Non-monetary gold (net) -16.9 -10.7 - 3.8 Services (net) -16.6 -18.7 -13. Dona ti ons: Private -7.1 -8.1 - 8.9 on current account -62.5 - 9.6 7.3 Capital movement (net) + 0.8 !-15.2 t1. Errors and omissions 4.38.5 i-20.7 t , Cumulative Total -233..-26 ChanTe in Reserves Increase (-), decrease (,e-) Bank of ofailand and commercial banks' forein Re-urities .b3.1 30.2 Sterling balances (net) -27.2 -22. -12.1 U.S. dolr balances (net) -..5 -10.o - 8.1 Japan Open Account 4.3 7.9 - 3.5 Other 41. 9 i2. b -l1. Monetarv gold - 0.8 0.6 - Toftal 236. -26.3 -24.9 has adjusted export and import figures, as refleoted in the custom.3 Inrears -, decreaose ( i o ,,,sv v) orf the estimated exss of actual f.o.b value of rice and rubber over import side, personal imports of diplomatic personnel and a small Sterln baane (net)+ --A -ý -27.2 -i- + 41 ,1 -22 -1.2.1 am ui O-L Vi LL.LL d.LJ£j rUUUz- 4i11UEý.L uj 1"L-L4 :d.Ly <%.L..Åi were inc-LIUded in the custons returns, were deducted. Since similar adjustments have J uaa uOen maccud nu 1955 liurs 1h- L[ ±u uaLa auove ar.3 7o.9 3 .' tly comparable with the 1955 data. If such adjustments were made the effect would oal o inceaof thents prosti trae Bakof '!h5iand lce theL estmaedexcssofatual f.o.b va-lue ý of ad riLace and ruove the errors and omissions. Source: IpF for 1954 and 1955; 9ank of Thailand for 1956. Table 10 End of Period Gold Sterling Dollars Other Total 1953 114 22 162 4 302 19514 113 >7 113 - 273 1955 112 53 133 - 298 1956 112 52 144 - 309 II 112 55 lo - 308 III 112 55 140 - 308 pr 112 55 144 - 311 1957 1 112 53 158 - 324 Note: Beginning in July 1955 the Bank of Thailand foreign exchange holdings include those of the newly created Exchange Equalization Fund. 71hese are assumed to be all in dollars. Source: IMF, International Financial Statistics. - 26- iablep 11 GOVERNMEN T REVE2NUE~ 1954 1955 1956 1957 Taxation 2,h77.6 2,851.3 2,793.5 3,102.8 Government omains 134.4 15[.5 15b.8 173.7 Governrent Enterprises 535.7 519.2 615.1 647.3 Fees, Licenses and Fines 320.8 332.9 294.9 281.8 Miscellaneous )49.3 70.0 52.b 77.1 Rice Bureau and Rice Premiuns 322 L4._) UL.U U3.3 Total Revenue 4,239.9 b,369.2 h,752.- 5,U.U q/ The -ctual figure of total revenue in 1956 is provisionally estimated at ß5,064.8 million. No estimates of the components of this total are ava ilb l - 29 - Table 12 BUDMT EXPENMITURES (million baht,) Actual Actual Budget Bucet Major Category 1954 1955 1956 1957 National Debt 149.7 252.3 252.7 335.2 External Security 943.6 1,476.2 820.1 780.5 Internal Security and Justice 295.7 652.5 420.1 343.4 Social Welfare 171.3 169.8 181.4 229.7 Government Enterprises 402.6 324.5 597.5 585.6 Economic Development 1,011.2 853.8 759.2 7h1.7 Education and Culture 319.h 775.0 294.8 172.9 Ci.vil Service 176.0 210.4 266.6 224,.2 Cost of Living Allowances for Officials 1,617.1b 2,050.0 2,374.8 Othera/ 186.h 268.1 270.0 556.1 Total 5,278.5 4,982.6 5,912.h2/ 6,34Ah.1 Extra Budgetary Expenditure 190.2 153.9 72.y Grand Total 5,468.7 5,136.5 n/ Ic Royal AccouIints,l nttuael mnenn+s, +nv ^tcllectiåon expenditures and expenditures on municipalities during 1954-1956; in 1957 i nclde also nr irvi l exp e nn dit r + rå+. no t +ye d it,er byN purpose. klfl4 istriuted i s..n'v4.n appropriat at amongt the l- other,pnditu¶re item c/ The provisional actual figure of total expenditures (excluding extra- d/ Provisional actual figure. T-bl 1-P I CDflURNIvMNT Ti URA-TMENT 1RYPENThTTTORR i q ni m114nnce% I-Nnlhi 1955 1956 .1957 Irrigation 203.6 183.4 177.6 Transportation 488.9 720.3 671.4 Industry 118.1 77.7 148.2 Other 183.7 283.5 276.9 Total 99h.3 1,26h.9-/ 1,27L.1 a/ The actual figure of total inv-estment in 1956 is provisionally stima ted at p9U>e million, bLt no estimates of tne compot are available. N.B. The above figures exclude the value of equipment and technical. services supplied by the U.S. under grant aid for development, largely for the highway program. The amounts involved are estimated at about $4 million (, 80 million) in 195, LU million ($ 200 million) in 1956, and $15 million ($ 300 million) in 1957. Ta-ble- Ih T,'MiRMIJ, PiRT.TC DE.PT (millions of baht) December 31, 1955 December 31 1956 Total Held by Bank Total Held by Bank Outstanding o%f Thailand Outstanding of Thailand Baht Securities 777.33 859. b322 Foreirn , Excnge Gov't Securities 1,200.0 1,200.0 1,200.0 1,200.0 'Ireasury Bills 3,266.7 3,196.6 3,266.7 3,132..8 Overdraft from Bnk of Thailn n. 9 9 7 96n 7 DdL 5,79.L3.847.- )47ýj ,73J7.5 737I M 4-1r' "nrý 0 'ý I. n '7 /_ ^ne.r ei C' 17-3. -7 - 32 - Table 15 PRICE INDTCES (11953 = 1nn) Cost of Living Wholesale Prices (Bangkok) 1954 98 99 1955 11b 105 1956 117 111 I 113 109 II 117 110 III 121 112 IV 116 111 1957 I 115 115 Source: Bank of Thailand, Current Statistics