Bank Of Thailand Warns Of New Economic Crisis

Central Bank Warns of New Economic Crisis

The central bank suggests the new government manage the state budget wisely and not fall into a public debt crisis like the US and Europe.

Standard and Poors, or S&P, has cut the long-term US. credit rating by one notch to AA+ (double A plus) over concerns about its growing budget deficit.

This is the first time in its 70 years of rating that S&P has lowered its outlook for the US, reinforcing fears of a rapid slowdown in world economic growth.

Bank of Thailand, or BOT, Governor Prasarn Trairatworakul said investors' reaction to the downgrade is what must be closely monitored as the S&P decision was made after the closing of stock and financial markets.

Prasarn further said that S&P's new rating has yet to prompt investors to sell their treasury bonds in the short term.

However, the sell-off is expected in the long term as more investors are likely to invest in gold instead.

The BOT governor noted that the public debt problem in the US and Europe is a lesson for Thailand to manage its budget wisely and not fall into a public debt crisis.

However, he is of the view that there is still no need for the government to use money to stimulate the economy.

He suggested the new government keep its budget to be spent when necessary or to deal with a possible economic crisis.

Prasarn believes if the new government carries out proper policies, the Thai economy will be able to grow by 4.1 percent this year as targeted.

-- Tan Network 2011-08-08