Thailand: TCC wants looser monetary policy

• Aug 09, 2019

The Thai Chamber of Commerce (TCC) has urged the Bank of Thailand to further ease monetary policy as a means to rein in the baht, while the Federation of Thai Industries (FTI) requested the central bank launch mid and long-term measures to stabilise the currency’s movement.

Apart from cutting the benchmark rate, managing offshore fund inflows and direct settlement of trade in local currencies are the main tools the central bank can use to tame the baht, keeping it in line with trade partners’ currencies, said TCC chairman Kalin Sarasin after a meeting with the central bank governor and executives on Thursday.

“Despite the recent quarter-point policy rate cut, the baht has not weakened significantly. The policy rate has enough space to manoeuvre,” he said.

On Wednesday, the central bank’s Monetary Policy Committee unexpectedly slashed the policy rate by 25 basis points to 1.5% as the economy and exports falter and baht runs up. The baht, perceived as a safe haven, is Asia’s top performing currency, rising nearly 6% on the greenback year-to-date.

Mr Kalin said the softer yuan will take a heavy toll on Thailand’s shipments to China, particularly farm products.

The baht is also the most volatile currency among emerging peers, he said, adding it is firmer than any other emerging currencies when rising, but also weaker than any others when falling.

Given that Asean trade has been on the rise, promotion for baht settlement, particularly in Cambodia, Laos, Myanmar, and Vietnam markets, would benefit business operators, said Mr Kalin.

Thailand has the potential to be the region’s financial hub if the central bank provides the support, he said.

Kriangkrai Tiannukul, vice-chairman of the FTI, said for the private sector, new mid and long-term measures are required in light of the latest policy rate cut.

“The FTI wants to see more monetary measures supporting business operators, especially exporters, because the baht’s appreciation is pressuring the country’s competitiveness.”

Mr Kriangkrai said the FTI has urged the central bank to launch support measures to encourage Thai investors to go overseas in a bid to balance capital inflows and outflows.

“The FTI expects the baht will strengthen into 2020 amid the current global economic sentiment. Otherwise, the government and the central bank would not launch any measures to stabilise the currency,” he said.

In addition, the FTI is calling for monetary policy to support small and medium-sized enterprises (SMEs) to access finance tools because SMEs are not capable of handling the baht’s volatility.

Phacharaphot Nuntramas, senior vice-president for global business and strategy at Krung Thai Bank, said Thailand’s economy has some downside risks, but 3% annual growth is possible if supported by government spending, which is expected to pick up in the second half, driven by mega infrastructure investment projects.

“There is a possibility Thailand’s policy interest rate could be reduced given that GDP growth will not reach the 3% target,” said Mr Phacharaphot.

Central banks across the globe have embarked on monetary policy easing to ward off risks amid a slowdown, he said.

Source: https://www.bangkokpost.com/business/1727035/tcc-wants-looser-monetary-policy