Thailand Holds Interest Rate Steady As Economic Outlook Dims

[george]

Thailand holds rate steady as economic outlook dims

BANGKOK, October 20, 2010 (AFP) - Thailand's central bank held its benchmark interest rate steady at 1.75 percent Wednesday as a faltering global recovery and a soaring baht raise concerns about the economic outlook.

The decision by the Bank of Thailand to pause after two consecutive rises in the cost of borrowing since July follows a surge in the value of the baht to a 13-year high against the dollar.

Higher interest rates -- as well as strong economic performance and buoyant stock markets -- are blamed for a flood of foreign funds into Asia that has pushed up regional currencies and threatened the competitiveness of exports.

However, Bank of Thailand assistant governor Paiboon Kittisrikangwan said the decision to hold rates steady was "not made under pressure from the baht's rapid appreciation".

He added: "The interest rate cannot answer all economic problems."

While the central bank is worried about the prospect of rising inflation, it is also concerned that weaker global growth might hurt exports.

"The global economic recovery is now expected to slow in tandem with an increase in uncertainty in the world economy and financial markets," Paiboon said.

For now, Thailand's economy appears robust. Exports increased 21.2 percent in September from a year earlier, to 18.06 billion dollars, while imports rose 16.03 percent to 14.9 billion dollars, official data showed Wednesday.

Commerce Minister Porntiva Nakasai said overseas shipments were on track to meet the government's target of 20 percent growth this year but accepted that the baht's appreciation could affect the outcome.

The kingdom has imposed several measures to curb the strength of the baht, including a tax for foreigners investing in Thai bonds.

The Thai economy has remained relatively resilient following two months of mass opposition protests that sparked violence in May that left 91 people dead after a bloody army crackdown.

Gross domestic product grew 10.6 percent in the first half of the year.

However, the World Bank this week predicted growth would slow markedly from 7.5 percent this year, to 3.2 percent in 2011.

-- (c) Copyright AFP 2010-10-20

[kuffki]

it is also concerned that weaker global growth might hurt exports.

Yeah its the global growth that is a threat to Thailand. The super duper mighty strong baht has absolutely nothing to do with it.

Edited October 20, 2010 by kuffki

[asiawatcher]

As long as exports keep rising over and above imports and the balance of trade is positive there should be no problem (or at least one less). But there will be a levelling of Asian currencies to be sure and I think the Baht will still come out smelling like roses.

[Pib]

I'm afraid that "rose smell" won't smell very good to folks living off dollars, euros, pounds, etc.

[Pib]

"However, the World Bank this week predicted growth would slow markedly from 7.5 percent this year, to 3.2 percent in 2011."

Now I expect the Thai govt spin-masters will respectfully disagree with the World Bank's 3.2% 2011 GDP estimate for Thailand and instead have a significantly higher estimate.

[givenall]

"However, the World Bank this week predicted growth would slow markedly from 7.5 percent this year, to 3.2 percent in 2011."

Now I expect the Thai govt spin-masters will respectfully disagree with the World Bank's 3.2% 2011 GDP estimate for Thailand and instead have a significantly higher estimate.

These so called analyst, or government officials are bunch paper pushers, gotten these important jbs through their contact. And have no real smarts or sense of reality, very good to talk to fortune teller. That is where their prediction is coming from

[SantiSuk]

"However, the World Bank this week predicted growth would slow markedly from 7.5 percent this year, to 3.2 percent in 2011."

Now I expect the Thai govt spin-masters will respectfully disagree with the World Bank's 3.2% 2011 GDP estimate for Thailand and instead have a significantly higher estimate.

Thai government has previously predicted 8% GDP growth for 2010 and World Bank confirms 7.5%. Wow - Thailand are huge exagerators - not. The Thai Finance Ministry is a bit more reliable than the Tourist Authority