With respect to the first channel, the GDP of Thailand is expected to contract by 5 percent in 1998, and unemployment rates have increased more rapidly than expected as firms' reduce labor demand. Preliminary survey data suggest that the unemployment rate has risen to 8.8 percent from 5.4 percent in 1997. Real purchasing power has fallen as inflation jumped from 4.4 percent in June 1997 to 10.2 percent in May 1998. The poor spend proportionately more on food than do higher income households. To the extent that they reduce food expenditures, their nutritional intake will fall.
Children are especially vulnerable to poor nutrition.
The lack of food affects their concentration and learning ability, stunting their cognitive development, and reducing future earnings potential. Falling incomes and increased prices will likely affect the health of the poor and more vulnerable groups the most, as they cut back on health-related expenditures. According to a WHO report on the health impact of the crisis, private hospitals have already experienced a fall in demand, and about one-third of private facilities said they do not expect to be open in 2 years' time. Part of the fall in private demand may be that poorer households are switching to public care facilities, which are subsidized. This places additional pressure on these facilities, which even before the crisis had difficulty meeting the demand for treatment.