Q In 1997, Thailand was at the epicentre of what has been called the first modern crisis of globalisation. How is the global economic crisis affecting Thailand this time around?

A We were completely buffered from a perspective of direct impact of the banking crisis in the West.


Our banks are financed entirely by domestic deposits and they are only lending about 88% of total deposit value, so there is excess liquidity. They had almost next to no investment in foreign financial assets. They’ve been very conservative.

Our corporations are very lowly geared. Looking at the major companies listed on the Stock Exchange of Thailand, I have never seen such low debt-to-equity ratios coming into a crisis. Household debt has been creeping up over the past few years but it is roughly at 50% to 60% of income, so it is a level that is manageable, especially in an environment when interest rates are falling.

Debt hasn’t been a problem. Exposure to foreign capital markets was only through the stock exchange so the only evidence of fund outflow has been through the market. But the Thai market has been suffering in the past few years, leading up to the crisis, because of our own political problems so there hasn’t been any kind of bubble in any asset class. That’s a stark contrast to the period leading up to the 1997 crisis. It is a complete inversion. Now it is all about demand management. We have seen rates of inflation diving all around the world.

Q You took office in December. What are your immediate priorities for the country?

A Thailand’s total export value is almost 70% of GDP. Its contribution net of imports is less, but when you’re talking about a 25% drop in export value in January, as opposed to normal rates of growth over the past few years of about 15%, then you are talking about a 40% swing in demand. That’s a very big drop-off.

The biggest challenge is the question of how to fill that demand gap. With exports down, private consumption has held up reasonably well, but will inevitably decline. Private investment in Thailand has been weak for some time and will continue to be weak.

The only arm left is the government. It is a very similar story to other countries around the world. Monetary policy is somewhat effective but it is not the sole answer.

Interest rates have been drastically reduced in Thailand and it hasn’t made an impact on loan growth although it has led to a reduction of financing cost for existing borrowers. The real impactful government role is through fiscal policy and that is why the government has had to step up with a fiscal stimulus. That has been my priority.

Q How does the size of the stimulus package compare with the projected fall in exports?

A The full-year deficit for the current year is Bt350bn ($9.7bn). It is not a drop in the ocean. The supplementary budget alone is worth 1.1% of GDP.

We are making a difference but we are not suggesting we can fill the gap entirely. It might not be prudent to try to do that in one shot. We have kept a lot of our powder dry. We need to wait to see what kind of impact [the stimulus] has on the economy then we can properly address that with the remaining ammunition that we have.


Korn ChatiKavanij

2008Government of Thailand

Minister of finance

2005Parliament of Thailand

Member of parliament, Democrat Party

1999JPMorgan Chase

Senior country officer

1998Jardine Fleming Thanakom

CEO/founding partner