Thailand
Thailand – Somkid: BoT taming baht independently
The government has given the Bank of Thailand a free hand in dealing with the baht’s rapid gain, says Deputy Prime Minister Somkid Jatusripitak.
Taking care of the baht is the central bank’s duty, he said.
“We’ve asked the central bank to monitor the baht’s movement, particularly in short-term fund inflows,” he said. “If the economy is not healthy, offshore funds will not flow into the country. The government doesn’t aim to intervene in the central bank’s work.”
Commenting on the World Bank’s concerns over the political uncertainty resulting from the new government’s slim majority, Mr Somkid said coalition governments are the norm in Thailand.
“The prime minister will be the same person, but how policies are implemented, including the Eastern Economic Corridor, will be altered,” he said. “I can confirm that everything will remain unchanged. Don’t worry too much. If the country’s economy can grow at 3%, we are faring well.”
Led by the Federation of Thai Industries (FTI), the private sector is urging the Bank of Thailand to cut the policy rate as a means to curb the baht’s rapid gain and boost sagging exports.
The FTI plans to hold a meeting with the central bank as soon as possible to discuss the stronger baht’s impact on the country’s exports, said Supant Mongkolsuthree, the FTI chairman.
The Bank of Thailand has several instruments to rein in the baht, including monetary policy easing, he said, adding that the FTI will ask the central bank to move as soon as possible without waiting for the US Federal Reserve to cut its own rate.
“The central bank’s policy rate cut would help ease the stronger baht,” Mr Supant said.
Should the baht hover in a range of 30-31 to the US dollar, it will help export growth avoid a contraction, he said.
The baht is the top-performing currency in Asia, up 5.6% against the greenback this year. According to data compiled by Bloomberg, the baht has climbed 8.6% against the dollar in the past year, making it the world’s best performer.
Customs-cleared exports fell by 5.8% year-on-year in May to US$21.01 billion after contracting 2.6% in April and 4.9% in March. For the first five months, exports shrank 2.7%.
Mr Supant said the FTI has prepared ample documents to show the impact of the baht’s appreciation on business operators.
Kalin Sarasin, chairman of the Thai Chamber of Commerce, said his group also plans to discuss the baht issue with the central bank.
Local currency for trade settlement is a suitable solution for foreign exchange rate management, and the central bank should pay more attention to such measures, he said.
The central bank’s Monetary Policy Committee (MPC) said in minutes of last month’s meeting that the rate-setting panel considered it necessary to prepare short-term capital inflow management measures to be ready for implementation at an appropriate time and to continue loosening capital outflow regulations to encourage larger outward portfolio investment.
The committee sees a need to closely monitor developments of exchange rates and capital flows, as well as impacts on the economy through various channels, especially employment, the minutes said.
“The committee views that the somewhat rapid appreciation of the baht might not be consistent with economic fundamentals and could negatively affect economic growth,” the MPC said.
The Joint Standing Committee on Commerce, Industry and Banking took a more pessimistic view at its meeting yesterday, cutting its forecast range for Thailand’s full-year economic growth, with the lower end now below the 3% mark.
The committee downgraded its outlook to a band of 2.9-3.3% from 3.7-4% predicted earlier, said Predee Daochai, chairman of the Thai Bankers’ Association.
Source: https://www.bangkokpost.com/business/1710451/somkid-bot-taming-baht-independently