BANGKOK, July 6: The recession-hit Thai economy has already bottomed and is in the process of recovery, although some serious problems remain in the financial sector, which is saddled with bad loans, Premier Chuan Leekpai said today, reports Reuters.

''Frankly speaking. I think the economy nas already bottomed out and we are in the process of recovery." he told Reuters in an interview.

"Nevertheless, some serious problems remain, particularly those concerned with financial institutions and bad loans and their restructuring process. But there are clear signals we are on the way to recovery." he said.

Chuan's comments buttressed recent statements by the central bank, the IMF and some analysts that key economic indicators show that the country may be on the road to recovery from recession.

"But I don't want to send any signal that would lead the public to become complacent or overly optimistic so that they will then begin not to undertake any of the fundamental reforms that are needed," he said.

The premier said that the trillions of baht in non-per-■ forming loans on the portfolios

of battered Thai financial institutions and problems they faced in restructuring and recapitalising themselves were a drag on the Thai economy.

"The need to improve their situation is because the existence of bad loans is the very reason why financial institutions are reluctant to lend," he added.

"Which in turn means businesses find it hard to obtain credit and that in turn has effects on the real economy and on employment," Chuan said.

On the bright side, the official think tank, the National Economic and Social Development Board (NESDB), said last week that Thai GDP grew 0,9 per cent year-on-year in the first quarter of this year — the first quarterly growth in two years.

Last year, the Thai economy contracted 9.4 per cent against official projections of a shrinkage of 8.3 per cent, the NESDB said. This year, official projections are for one per cent or slightly better economic growth.

The government, in an effort to spark up slow consumer demand and kickstart the moribund economy, launched a $ 3.5 billion economic stimulus package on April 1. cutting

value added tax to seven per cent from 10 per cent and boosting public spending.

Officials expect the effect of the stimulus package to start kicking in late this year.

Latest Bank of . Thailand data showed the closely-watched manufacturing production index was 7.2 per cent higher year-on-year this May. its fifth consecutive monthly increase. May exports and imports were also robust.

On privatisation of State enterprises. which has run into some major problems with their managements and employees. Chuan said he expected a rocky road ahead but there would be no turning back from the objective.

We are determined in our efforts to pursue privatisation and we are firm in dur belief that the policy will benefit the public in general through the reduction in burdens on tax payers." he said.

Chuan's cabinet has approved a privatisation masterplan to sell off parts of state enterprises such as the Electricity Generating Authority (EGAT), Bangchak Petroleum Plc BCP.BK and Thai Airways In-ternational THAI.BK.