that the bank of thailand has maintained for the past 5 years and is now beginning to bear fruits. the accommodative monetary policy resulted in robust growth of mortgage lending as well as other types of consumer loans. consumer confidence rose to its highest level in recent years. domestic investments improved too. i agree that at the moment not much of the new business investment was yet financed by bank loans. the entrepreneurs still rely more on their internal cash. but the latest investment indicators showed an annual rate of increase at a high of 23 %. domestic demands have been helped not only by direct government spending, but also by other government schemes that injected funds directly to the grass roots. we had the bht 74 billion village fund ( approx us $ 1. 7 billion ) whereby each village had been allocated bht one million to on lend to village members, often under group mutual guarantees. we also had the micro loan scheme organised by the government savings bank, the government owned bank, which lend directly to the poor. ladies and gentlemen, the good news went on. despite the strong recovery, we have been able to keep inflation under check. headline inflation for 2002 was 0. 7 % and core inflation 0. 4 %. the adverse affect from high oil prices has not translated into much inflation. our currency was also quite stable. for the whole of 2002, the bath appreciated against the us dollar by less than 2 %, which was quite modest compared to other asian currencies. the international reserves level was also ample at us $ 38. 9 billion, allowing us to aim to pay back all the loans under the imf program by the end of july this year. moreover, three major credit rating agencies, s & p, moody ’ s, and fitch ratings, all assigned better outlook to the thai economy. japan credit rating agency did in fact upgrade thailand ’ s sovereign rating from bbb to bbb + last november. such widespread improvement in confidence among consumers, entrepreneurs, and investors helped support both consumption and investment throughout the year. we have also made a substantial progress in solving the non - performing loan problem. the thai asset management corporation, the central organization run by the government that took over bht 700 billion of npl ’ s from the commercial bank system has already worked through two - thirds of their portfolio. the recovery rate was 135 % of the tamc ’ s purchase prices, which was the banks ’ written down value. this means that the tamc should not add any further

thirachai phuvanatnaranubala : prospects for the thai economy speech by mr thirachai phuvanatnaranubala, deputy governor of the bank of thailand, at the german - thai chamber of commerce annual meeting, bangkok, 18 february 2003. * * * ambassador andreas von stechow, distinguished guests, ladies and gentlemen, it is a pleasure for me to be here. my task today is to assure you, as one of our most important groups of foreign investors, that the thai economy is doing well. and for this year my task is quite easy. 2002 was a good year for the thai economy. despite much uncertainty in the global conditions, the thai economy made a robust recovery with stability, both on the internal and external fronts. you may recall that 2 years after the crisis, we started to have positive growth in 1999. gdp growth rates for 1999 and 2000 were strong at 4. 4 and 4. 6 %. but the year after that, in 2001, the global downturn adversely affected our export and made growth for 2001 dip to 1. 9 %. however, we recovered in 2002 when growth for the first three quarters climbed back up to 4. 9 %. for the final quarter, our initial estimate is just over 5 %, which would result in growth for 2002 the whole year at 5 % as well. this is a good performance in the midst of slow growth in many parts of the world. so what has caused this? first, there was an export recovery. export contracted as much as - 7 % in 2001. but it began to recover in april 2002. the latest figure for the whole year showed the annualised growth at almost 6 %. this was a dramatic turn around. it should be noted that the export recovery did not come entirely from our traditional markets, the us and europe. what we did see was that export to asia increased by over 7 %, somewhat higher than the average figure, with china absorbing a good 23 % more of thai goods this year compared to last. second, farm prices improved substantially. prices increased by 11 % boosting farm income by the same percentage for the whole year. both these factors helped improve our domestic consumption especially the sale of automobiles, motorcycles and construction. third, there was a strong recovery of other domestic demand. part of this was helped by the fiscal stimulation. in 2002 the budget deficit was at 3. 6 % of gdp. the other factor was the low interest rate environment