A solid financial armor could not protect Thailand against the impact of the global financial crisis on its real economy. Despite a sound banking system and low external vulnerabilities, the Thai economy contracted 5.7 percent between October 2008 and March 2009, as the magnitude and speed of the contraction in foreign demand, and resulting shock to the real economy, has been greater than anticipated. There continues to be little impact of the global financial crisis on Thailand's banks: liquidity remained adequate as financial institutions did not face solvency concerns given their adequate capitalization and lack of exposure to 'toxic' assets or risky derivative contracts. The combination of a sound financial sector, low external roll-over and balance-of-payment financing requirements, and, more recently, large current account surpluses, has led to capital inflows, build-up in reserves and an appreciation of the Baht relative to other currencies in the region. However, the impact of the global crisis on the real sector was far more severe than expected. Export volumes contracted by 8.9 percent in the fourth quarter of 2008, compared to the World Bank's forecast in December of a 3.0 percent expansion. Exports contracted a further 16 percent in the first quarter of 2009. The aggravation of Thailand's political crisis, which had been dampening investor and consumer confidence since 2006, compounded the shock to the real economy. As a result, real gross domestic product (GDP) contracted in the fourth quarter of 2008 and first quarter of 2009 after 38 quarters of growth, and is expected to contract for 2009 as a whole, the first annual contraction since the Asian financial crisis of 1997-1998.