Chavalit sees an end to economic troubles

By Associated Press
DATE : 01/07/1997 02:01:40

DESPITE a vow from the Thai prime minister that he would never devalue the nation's currency, it fell in yesterday morning trading.

During a nationally televised speech on Sunday evening, Chavalit Yongchaiyudh said the worst was over in Thailand's economic troubles and the economy was at the start of a rebound.

The prime minister cited four executive decrees he issued last week as evidence he was taking decisive action to repair the economy.

The decrees permitted the central bank to shut down 16 ailing finance firms on Friday and force them to come up with plans to merge with companies in better shape.

He also ruled out a devaluation of the baht, the Thai currency. "We would all become poor," he said.

In domestic spot trading yesterday morning, the dollar rose to Bt25.89 from Bt25.87. Dealers said Thai corporations were buying dollars to hedge their debt because of fears the baht will be devalued.

Chavalit has undergone severe verbal battering in a parliamentary budget debate last week, during which the opposition accused him of doing nothing to solve the economy's troubles.

In a recent opinion poll, 44 per cent of those surveyed said Chavalit was up to the job of prime minister.

Several securities firms have issued reports predicting more economic pain for the country before a real rebound begins.
The Thai economy has been plagued by high personal and corporate debt plummeting exports and a glut in the property sector that has left many developers unable to repay loans to financial institutions.

There have also been speculative attacks upon the baht, and several economists and business leaders have been calling for a devaluation.

The head of the Thai Bankers Association, Olarn Chaipravat, told the Bangkok Post yesterday that speculators would probably attack the baht again soon.

Devaluing the currency would help reduce the price of Thai exports making them more competitive. But some economists note that Thai manufacturers import raw materials, which would become more expensive with a weaker currency.
A weaker baht would also raise the price of imported consumer goods.

Chavalit has urged Thais to stop buying them and instead begin saving more money.

"We have been over-consuming," Chavalit said. "This can be seen from the fact that each family has many cars."