Bank Of Thailand Head Opposes 'Weak-Baht, Low-Interest' Concept

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BOT

BOT head opposes 'weak-baht, low-interest' concept

Wichit Chaitrong

The Nation

BANGKOK: -- Bank of Thailand Governor Prasarn Trairatvorakul has said he does not agree with Finance Minister Kittiratt Na-Ranong's concept of a weaker baht and lower interest rates.

Meanwhile, Kittiratt today is expected to propose that the Cabinet set up a development fund to support state-run banks.

On the currency issue, Prasarn said too much intervention by the central bank in the exchange rate would backfire. If the BOT pushed the baht, say, from Bt30 to Bt33 per US dollar, it would invite higher dollar flows as investors would believe the Thai currency was artificially weak. They would gain when the baht moved back to its market value.

Higher dollar flows would increase pressure on the baht. Then the BOT would have to step in to buy dollars, resulting in a high cost from the intervention to keep the baht weak, he said.

Thailand had learned a hard lesson in 1997 when it tried to manipulate the exchange rate, resulting in the financial crisis, he noted.

Kittiratt also wants lower interest rates to boost economic growth. But Prasarn said the current policy rate of 3 per cent was the lowest in the region. When compared with the inflation rate of 3.3 per cent, the policy rate is still in negative territory.

Moreover, the economy has recovered from last year's flood disaster, the BOT governor said. Consumption and tourism have recovered. The government has spent more to boost the economy, while manufacturers are expected to resume full production by the third quarter. These factors will result in high inflationary pressure, he said.

Kittiratt believes that a weak baht would support exporters. But Prasarn said high economic growth of trade partners was more important for boosting Thailand's exports than a weak baht.

In a related development, a source said Kittiratt today was expected to submit to the Cabinet a proposal to set up a state bank development fund. Funding would come from fees that the central bank collects from state-run banks amounting to 0.47 per cent of their deposit base.

Government Housing Bank, Islamic Bank of Thailand, the Small and Medium Enterprise Development Bank of Thailand, and the Bank for Agriculture and Agricultural Cooperatives are expected to benefit from the scheme. These banks regularly ask for capital injections from the Finance Ministry, while the Government Savings Bank, which is flooded with deposits, might not benefit from the fund.

-- The Nation 2012-03-29

[BookMan]

Finance Minister Kittiratt should leave the central banking to the experts and stick to Politics

[MaxLee]

So the Finance Minister wants to use "the easy way out", just manipulate the currency issue with a magical finger snap.

[Pib]

Finance Minister Kittiratt should leave the central banking to the experts and stick to Politics

Above implies Kittiratt is an expert in politics which is probably false...but he can indeed talk alot.

[Thai at Heart]

I wonder what type of business Mr. Kittirat and his extended family engage in?

[MaxLee]

Probably in some sort of corruption business that enables those dudes to enrich themselves.

[rudolfsen]

how you think the rich became richer? woldwide the same story.

Posted with Thaivisa App http://apps.thaivisa.com

[Thai at Heart]

• Board of Governors, Harrow International School Association
  
• Team Manager, Thailand Football Team (Asian Cup 2007)
  
• Commission Member, The Securities and Exchange Commission
  
• Director, Vayupak Fund Committee
  
• Member, Office of Thailand Knowledge Park Committee
  
• Director, Property Management Office, Chulalongkorn University
  
• Member of the Executive Board, Sports Authority of Thailand
  
• Director and Board Secretary, Federation of Thai Capital Market organizations
  
• Director, State Enterprises Capital Policy Committee
  
• Independent Director, Trang Seafood Products Public Company Limited
  
• Director, Mass Rapid Transit Authority of Thailand
  
• Honorary Advisor, Permanent Committee on Economic Affairs, House of Parliament
  
• Awarded “Financier of the Year 2005” from Money & Banking Magazine
  

http://www.sasin.edu/about/faculty/kittiratt.html

Love it, high finance, and seafood. What an interesting combination of skill sets this man possesses. Couldn't be that a weaker baht might give the seafood side of business a bit of a push could it?

[Rosco911]

BOT governor said. Consumption and tourism have recovered.

Try walking the street of Chiang Mai and see if tourism has recovered, even the top BKK newspapers quote a 50% reduction in tourists. Forecast for the Songkran festival say tourist figures will be considerable lower than previous.

[GentlemanJim]

Stand by for a new 'more co-operative' Governor of the Bank of Thailand! (if one is appointed, get on the currency market fast and go all in!!)

[MrJohnson]

With the introduction of the new minimum wage and the attendant 'domino' effect look out for a further and steeper spike in inflation. Once the treasury politicians start messing with exchange rates it is a slippery slope into the banana republic. Hold on! It could be a bumpy ride!

[lungmi]

Chavalit is back. In the late 90ths He "saved" Thailand, the Master of currency and rice stock manipulations.

Expats, dont worry, you'll have more more money.

[bigbamboo]

Finance Minister Kittiratt should leave the central banking to the experts and stick to Politics

But he's no good at politics either.

[BookMan]

Finance Minister Kittiratt should leave the central banking to the experts and stick to Politics

But he's no good at politics either.

Not many of them are

[MaxLee]

Which politician was ever good in anything except in filling up their pockets with the nation's tax money?

[yumidesign]

I wonder what type of business Mr. Kittirat and his extended family engage in?

i think this is much closer to being the real reason, would be very interesting to know the answer

[GentlemanJim]

I wonder what type of business Mr. Kittirat and his extended family engage in?

i think this is much closer to being the real reason, would be very interesting to know the answer

Fish!

Check out the list above. He is a Director of Trang Fish company. So a devalued baht would indeed cause an export boom......for his business!

[animatic]

Finance Minister Kittiratt should leave the central banking to the experts and stick to Politics

Most likely we'll see a move to remove Prasarn...

They want what they want Mand will bulldozer over all in their way if they can.

[geriatrickid]

The pressure is coming from Thailand's export sector. I suggest those claiming a conspiracy look at what the big industry groups are recommending.

I find it odd that so many people in TVF were complaining the baht was over valued, and now as soon as the issue is discussed, by the government, it is condemned.

[GentlemanJim]

The pressure is coming from Thailand's export sector. I suggest those claiming a conspiracy look at what the big industry groups are recommending.

I find it odd that so many people in TVF were complaining the baht was over valued, and now as soon as the issue is discussed, by the government, it is condemned.

Who is condemning it? As far as I am concerned bring it on. I will be whacking everything on a devaluing baht at the first sniff of a move to replace the Governor of the bank of Thailand. Much much money will be made add to that the benefits of living here and transferring foreign currency how on earth can it be a bad thing?

I think that with the sound economic advice given by the bank's Governor, people are questioning the Finance Ministers motives in pressing ahead, that's all.

[lungmi]

The pressure is coming from Thailand's export sector. I suggest those claiming a conspiracy look at what the big industry groups are recommending.

I find it odd that so many people in TVF were complaining the baht was over valued, and now as soon as the issue is discussed, by the government, it is condemned.

Who is condemning it? As far as I am concerned bring it on. I will be whacking everything on a devaluing baht at the first sniff of a move to replace the Governor of the bank of Thailand. Much much money will be made add to that the benefits of living here and transferring foreign currency how on earth can it be a bad thing?

I think that with the sound economic advice given by the bank's Governor, people are questioning the Finance Ministers motives in pressing ahead, that's all.

It's not a conspirancy, yes it is a conspirancy. Chavalit is back.

[Jim walker]

Last year a Thai company bought one of Germanys largest shell fish processing plants, nice and cheap Euro only cost a few Bahts

[damo]

investors would believe the Thai currency was artificially weak. They would gain when the baht moved back to its market value.

I did not think the THB was traded on the open market.

Prasarn said the current policy rate of 3 per cent was the lowest in the region. When compared with the inflation rate of 3.3 per cent

Hmmm, this does'nt sound right.

[lannarebirth]

The pressure is coming from Thailand's export sector. I suggest those claiming a conspiracy look at what the big industry groups are recommending.

I find it odd that so many people in TVF were complaining the baht was over valued, and now as soon as the issue is discussed, by the government, it is condemned.

The government is running huge deficits while at the same time shifting huge governmnet debt off balance sheet. The former government was able to pull that off during the financial crisis as Debt to GDP ratios were so low and the enjoyed both low Bond rates and excellent bond ratings. I imagine both of those will deteriorate quickly under this regime. In addition because their policies are "populist scams" in nature the money spent will not accrue to any marked GDP growth.

[Thai at Heart]

The pressure is coming from Thailand's export sector. I suggest those claiming a conspiracy look at what the big industry groups are recommending.

I find it odd that so many people in TVF were complaining the baht was over valued, and now as soon as the issue is discussed, by the government, it is condemned.

The government is running huge deficits while at the same time shifting huge governmnet debt off balance sheet. The former government was able to pull that off during the financial crisis as Debt to GDP ratios were so low and the enjoyed both low Bond rates and excellent bond ratings. I imagine both of those will deteriorate quickly under this regime. In addition because their policies are "populist scams" in nature the money spent will not accrue to any marked GDP growth.

And yearly government borrowing is way way way below the levels of the west. The issue is the 1997 debt still hanging around, but deficits here are about 45% of GDP, so when people here are running around worrying about becoming another Greece they could spend to their hearts content (bearing in mind that the economy is growing 3-5% a year anyway, so automatically there is a minimum 3-5% increase just to keep the same level) for many many years to come. The question is HOW is it going to be spent and will it represent value for money and long term benefit.

[CaptHaddock]

So the Finance Minister wants to use "the easy way out", just manipulate the currency issue with a magical finger snap.

Currency manipulation has worked very well for China since the early 90's.

[Grumbles]

Which politician was ever good in anything except in filling up their pockets with the nation's tax money?

Very true. In any country.

How do you know when a politician is lying?

His/her lips are moving.

[geriatrickid]

• Board of Governors, Harrow International School Association
  
• Team Manager, Thailand Football Team (Asian Cup 2007)
  
• Commission Member, The Securities and Exchange Commission
  
• Director, Vayupak Fund Committee
  
• Member, Office of Thailand Knowledge Park Committee
  
• Director, Property Management Office, Chulalongkorn University
  
• Member of the Executive Board, Sports Authority of Thailand
  
• Director and Board Secretary, Federation of Thai Capital Market organizations
  
• Director, State Enterprises Capital Policy Committee
  
• Independent Director, Trang Seafood Products Public Company Limited
  
• Director, Mass Rapid Transit Authority of Thailand
  
• Honorary Advisor, Permanent Committee on Economic Affairs, House of Parliament
  
• Awarded “Financier of the Year 2005” from Money & Banking Magazine
  

http://www.sasin.edu.../kittiratt.html

Love it, high finance, and seafood. What an interesting combination of skill sets this man possesses. Couldn't be that a weaker baht might give the seafood side of business a bit of a push could it?

Or maybe his work experience gives him a better understanding than most of the importance of FX rates.

[gand]

investors would believe the Thai currency was artificially weak. They would gain when the baht moved back to its market value.

I did not think the THB was traded on the open market.

Prasarn said the current policy rate of 3 per cent was the lowest in the region. When compared with the inflation rate of 3.3 per cent

Hmmm, this does'nt sound right.

I thought is was pegged to the same super secret basket of currencies as the Malaysian ringit, since they move in tandem and the baht stays at approximately 10 times the ringit. Is that not true?

Edited March 31, 2012 by gand