Faced by strong baht, Thailand plans to relax rules on outflows

By Matthew Tostevin, Orathai Sriring

 

Thailand's Central Bank Governor Veerathai Santiprabhob speaks during an interview with Reuters at the Bank of Thailand in Bangkok, Thailand, October 4, 2019. REUTERS/Matthew Tostevin

 

BANGKOK (Reuters) - In the face of a strong baht that has been Asia’s best performing currency this year, Thailand will further relax rules on capital outflows before the end of the year, the central bank governor said on Friday.

 

Veerathai Santiprabhob told Reuters in an interview that he thinks monetary policy is currently accommodative, but the bank is ready to take action if needed - and is keeping a close watch out for any further global shocks.

 

The Bank of Thailand (BOT)'s monetary policy committee held policy steady last week after a surprise rate cut in August, but downgraded its 2019 growth outlook amid heightened global risks and a strong baht THB=TH.

 

“For the current projections, I think that the current policy rate is accommodative,” Veerathai said.

 

“But if we see the deterioration of economic activity beyond what we have forecast, we stand ready to review our monetary policy,” he said.

 

“If the global economic condition deteriorates much further, that would be one of the main factors. I think that’s the largest factor”.

 

Risks to financial stability are still a concern for the policy committee, he said.

 

“When interest rates have been low for a long time, it has some impact on the leverage of the whole economy... We need to be mindful of that impact on financial stability as well”.

 

High household debt levels - at 78.7% of GDP at the end of June - are “not healthy”, Veerathai said, adding he is hoping that will come down or at least the trend will stop.

 

Recent government stimulus measures are helpful, and more are expected, Veerathai said. He declined to give details as to exactly what he expected, but said it was not only about spending money.

 

On Sept. 25, the BOT kept its benchmark interest rate THCBIR=ECI unchanged at 1.50% - just a quarter point above the record low.

 

But it cut its 2019 economic growth forecast 2.8% - which would be the lowest since 2014 - from 3.3%, and predicted falling exports. Last year’s growth was 4.1%.

 

In April-June, Southeast Asia’s second-largest economy expanded just 2.3%, the weakest pace in nearly five years.

 

The rate cut did little to curb the baht’s strength and with low inflation and weak growth, some analysts expect further rate cuts later this year.

 

FURTHER RELAX RULES ON OUTFLOWS

 

The central bank will monitor the movement of the baht closely and is ready to deploy measures on “undesirable inflows” to make sure that the baht’s movement does not hurt the economy, Veerathai said.

 

Before the end of the year, the central bank will announce more liberalization on capital outflows for Thai investors to invest abroad to help better balance inflows and outflows, Veerathai said.

 

That will be a “substantial increase” in the ceilings that let investors such as mutual funds invest abroad, while the limit that allows Thai investors to directly invest overseas will also be increased, he said.

 

There will be measures that allow exporters to have more flexibility in keeping foreign currencies abroad, instead of bringing them back to Thailand, Veerathai said.

 

The baht is Asia’s best performing currency this year, up nearly 7% against the dollar, putting further pressure on Thailand’s export-driven economy.

 

Veerathai said he did not expect headline inflation to be negative and it should return to the central bank’s 1-4% target range next year.

 

The central bank will decide at the year-end whether it needs to impose a debt service ratio limit, he said.

 

-- © Copyright Reuters 2019-10-04

Follow Thaivisa on LINE for breaking Thailand news and visa info

 

In Baht we trust...

21 minutes ago, snoop1130 said:

“If the global economic condition deteriorates much further, that would be one of the main factors. I think that’s the largest factor”.

Good to have it confirmed that that economic conditions are deteriorating and that they will restrict capital outflow. 

Whatever that might mean.

The string pullers in the Thai economy are a real worry. That they are military people makes the prospects even worse.

I think these officers are not in touch with reality. They have been relaxing rules for a few years now and it does zilth to the Baht.

 

Relaxing more rules won't help because Thai people aren't used to investing abroad in the first place. It is the speculation money that is flowing in from America and Europe that's the real culprit.

33 minutes ago, snoop1130 said:

High household debt levels - at 78.7% of GDP at the end of June - are “not healthy”, Veerathai said,

Considering they buy fried food on the way to work, fried food for lunch and fried food or som tam on the way home for the evening , it wont be the 'unhealthy debt' that kills them

Good topic to ask this in.

 

Should we decide (be forced) to move back to the UK at some point, one of the options would be to rent out our family home which belongs to my wife.  Are there any legal or tax issues that would hinder sending the income out of Thailand on a regular basis?  Likewise, should we sell our home, is a Thai national able to send the proceeds abroad to the country where they have moved to? 

In other words, we don't care if the tapioca growers, or rice growers, or rubber growers, or large int'l manufacturers are being hurt by the strong baht. Don't care that the tourists are dropping off and hurting the people eating day to day, or that the projected economy for this year and next year have been substantially downgraded which may put more people out of work. We'll fix it so the local mutual funds that are invested in by elites  (what percentage of Thais are invested in mutual funds?) can get a better return outside Thailand than they can inside Thailand we'll allow the bigger outflows (so they don't get caught in the  general economic malaise we are creating). Allow exporters to leave money outside Thailand instead of repatriating back to Thailand? Do you really think they are now?

Edited October 4, 20196 yr by Rama
edit

The baht is rising again today.

12 hours ago, Cadbury said:

Good to have it confirmed that that economic conditions are deteriorating and that they will restrict capital outflow. 

Whatever that might mean.

I take it to mean I'm gonna have a problem when I want to repatriate my 800,000 baht. I'm welcome to leave, not so much my extension bond money.

capital outflows, for THAI exports only that buys land and businesses and own that at 100 percent while farang cannot even own the land he pays to build a house on

 

So central bankers will closely monitor the baht?  And for the past two years of Baht appreciation—they have also closely monitored the Baht...

Perhaps a more plausible explanation—central bankers have profited from hot money inflows, and they’re not about to change a very lucrative procedure.

13 hours ago, snoop1130 said:

In the face of a strong baht that has been Asia’s best performing currency this year, Thailand will further relax rules on capital outflows before the end of the year

As I understand that Thailand historically has had a net negative outflow of foreign direct investments including being among the lowest even to ASEAN members, relaxing the rules won't make a difference.

And a strong baht remains.

12 hours ago, Cadbury said:

Good to have it confirmed that that economic conditions are deteriorating and that they will restrict capital outflow. 

It's the opposite. They will relax capital outflow. 

13 hours ago, Greenside said:

Good topic to ask this in.

 

Should we decide (be forced) to move back to the UK at some point, one of the options would be to rent out our family home which belongs to my wife.  Are there any legal or tax issues that would hinder sending the income out of Thailand on a regular basis?  Likewise, should we sell our home, is a Thai national able to send the proceeds abroad to the country where they have moved to? 

You should sell your house because rental income is pittance.

 

This is a good time to send huge money abroad because of the relaxed rules. 

 

 

 

13 hours ago, RichardColeman said:

Considering they buy fried food on the way to work, fried food for lunch and fried food or som tam on the way home for the evening , it wont be the 'unhealthy debt' that kills them

 

I've long been puzzled how Thai food gained such a positive image around the world, when 1 - it's actually largely based on Chinese and Indian dishes, and 2 - most of it is extremely unhealthy, being deep fried or fattening noodles and often containing huge amounts of sugar.

 

They have a day at my local hospital set aside each week for treating diabetics, and the place is packed out with people having to wait hours for their turn to see the doctors. The diet is also probably the cause of the dreadful acne that many Thais suffer from.

I am confused. In an article earlier in the week they were discussing additional controls over bank transfers of over 50k, here they are talking about relaxing rules on cach leaving the country.

 

Am I missing something? Or could it be these rules are for the elite and the other rules are for the 99%?

54 minutes ago, madmitch said:

I am confused. In an article earlier in the week they were discussing additional controls over bank transfers of over 50k, here they are talking about relaxing rules on cach leaving the country.

 

Am I missing something? Or could it be these rules are for the elite and the other rules are for the 99%?

They increase surveillance over outgoing bank transfer while decreasing restrictions. 

Prediction, the world is changing and the baht will not stay strong forever. 

The current strength is due to capital inflows as supply chains are rejigged away from China and relatively high interest rates in Thailand. This will not go on forever.

It's always risky to borrow in a currency other than the one you earn in. As a depositor facing a marked reduction in government backing for retail accounts, I do hope KBank have hedged this bond.

15 hours ago, Cadbury said:

That they are military people makes the prospects even worse.

 

If the military of all countries were good in economics, that would be ...
Their job is to theoretically defend the borders of a country; nothing else .
When they get mixed up in politics or economics they can only do havoc

14 hours ago, kevin612 said:

The baht is rising again today.

And the purchase price of raw rubber drops drastically;
yesterday the farmers were selling their crops in the fortnight at 17.5 baht per kilogram, a few miles from my village.
When it is working in "carpet" or large patties this price is about double;
Ten years ago the crude was bought 80 baht per kilogram;
the pancakes about 150 baht the kilo ..
But ten years ago the euro was worth 45 baht.

17 hours ago, snoop1130 said:

hoping that will come down or at least the trend will stop.

So HOPE is all? No actions? How pathetic ????

17 hours ago, mok199 said:

In Baht we trust...

In God I trust all others pay cash  !

Well, the elite can invest overseas easier then ..... good to know.

Meanwhile many SMEs in Thailand (hotels, restaurants and guest houses) are going belly up; many export producers and traders follow suit. 

Wondering what makes Thailand, is is investing elite or hundreds of thousands working in the export or hospitality industry - go figure! 

The damage is already done! and it will take years if not decades to reverse caused by high baht. Why should countries be purchasing any goods in Thailand when they have gone somewhere else and saved 30%-Fact....Rice,Rubber, Fish etc etc

On 10/4/2019 at 2:35 PM, Greenside said:

Good topic to ask this in.

 

Should we decide (be forced) to move back to the UK at some point, one of the options would be to rent out our family home which belongs to my wife.  Are there any legal or tax issues that would hinder sending the income out of Thailand on a regular basis?  Likewise, should we sell our home, is a Thai national able to send the proceeds abroad to the country where they have moved to? 

Depending on how long you have lived in Thailand, now would be a good time to sell up, as a previous poster said rental income is very poor, and there is a large number of properties on the rental market still empty, 

I sold up and returned to the UK,  I purchased my property when the Baht was 73B to GBP, I sold my property for the same price I paid back then, but got £1 for every 39B, so made money on the exchange rate, I did transfer the cash back in blocks and not all in one transaction and took the last million in cash and declared it at the airport.... 

Accommodative,say that <deleted> in Thai if you can.this fella must eat a dictionary for breakfast.

as for curbing inflows,your too late mr....all them government bonds you sold the Chinese and keep selling will come back and haunt you big time..Thailand will soon be known as little china town.

20 hours ago, justin case said:

capital outflows, for THAI exports only that buys land and businesses and own that at 100 percent while farang cannot even own the land he pays to build a house on

 

Why anyone would want to buy land and build a house on it but never 'Own' it....is beyond me.

 

Had lunch the other day with two bank employees if UOB..,,two credit card collectors. They told me when I asked, what are the Thais using the CC’s for?

Iphones and they hang up those phones when we call and ask why are you behind and when are you going to pay for this month?

”CLICK”.... was the reply!

ha! 

4 hours ago, Teee said:

Why anyone would want to buy land and build a house on it but never 'Own' it....is beyond me.

 

But you can "own" it through your children ,when i die my son just keeps paying the mortgage .

4 hours ago, Teee said:

Why anyone would want to buy land and build a house on it but never 'Own' it....is beyond me.

 

It becomes a gift to my younger wife.  If she goes before me, my lease will allow me to continue living here as long as I wish.