Ex-Finance Minister Suchart Urges Bank Of Thailand To Cut Policy Rate

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Baht

Ex-finance minister Suchart urges BOT to cut policy rate

Pranee Muenphangwaree

Tinnakorn Chaowachuen

The Nation

BANGKOK: -- Former finance minister Suchart Thadadamrongvej yesterday added to the pressure mounting on the Bank of Thailand (BOT) to take steps to stem the appreciation of the baht, urging the central bank to trim its policy rate to stave off the torrent of capital flowing into the Kingdom's capital and asset markets.

Suchart is concerned that the baht's rise has affected the export sector, which would eventually affect the government's revenue. If the central bank continues to maintain its high policy rate, it will continue to attract huge inflows and boost inflation, the former minister said, adding that the BOT should set the policy rate lower than those in the global markets.

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His remarks yesterday followed a spate of comments on the baht in recent weeks, including those by Ammar Siamwalla, professor emeritus of the Thailand Development Research Institute, who favours capital controls to stem the inflows, believing lower interest rates alone may not be enough to cut the inflows and prevent asset bubbles.

Over the past week, echoing BOT chairman Virabongsa Ramangkura, Finance Minister Kittiratt Na-Ranong said he favoured a policy-rate cut to match historically low interest rates in the United States and Japan, but left it to the central bank to make the decision.

The National Food Institute yesterday expressed concern over the impact of the baht's appreciation on the food-export sector, which is expected to lose some of its competitive edge to overseas competitors this year.

The Bt300 daily minimum wage hike has also added to the sector's production costs, and some operators have not bee able to adjust, Industry Ministry permanent secretary Vitoon Simachokdee said after a meeting with the institute yesterday.

The institute projects the value of food exports this year to reach Bt1.05 trillion, up 7.2 per cent year on year, due to the improving global economy, which is expected to grow 3.5 per cent this year, versus 3.3 per cent last year.

Commerce Minister Boonsong Teriyapirom said that based on a preliminary discussion with the Thai Chamber of Commerce and the Federation of Thailand Industries on the impact of the rising baht, he believed many exporters could continue to do business as usual, as they have adopted currency hedging by using forward contracts. However, the smaller operators might feel the pinch from the strengthening baht, he said.

"We maintain an export growth target of between 8 per cent and 9 per cent this year. But we did not factor in the baht rise when setting the target. We have asked related state agencies to collect information on factors that could impact exports and will see if we need to review the growth target," Boonsong said.

The ministry, FTI and Chamber of Commerce will have formal discussions on the impact of the strengthening currency next week, and the results will be forwarded to the government to work out measures to help exporters in each industrial segment.

The Stock Exchange of Thailand composite index yesterday gained 25 points to end the day at 1,499.22. The index, rising 1.7 per cent from the previous closing, was boosted largely by foreign capital inflows. Turnover was Bt58.5 billion. Foreigners' net-buys in January reached Bt15 billion.

Asian bourses were mostly up yesterday. Tokyo was up 0.47 per cent, or 52.68 points, at 11,191.34 and Sydney climbed 0.87 per cent, or 42.3 points, to 4,921.0, but Seoul eased 0.21 per cent, or 4.15 points, to 1,957.79. Shanghai surged 1.41 per cent, or 33.60 points, to 2,419.02, while Hong Kong was flat, dipping 7.69 points to 22,721.84.

-- The Nation 2013-02-02

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Finance minister upset with inaction on Thai baht, policy interest rate

By Digital Media

BANGKOK, Feb 2 – Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong has expressed displeasure over the sharp appreciation of the Thai baht and the high policy interest rate fixed by the Bank of Thailand (BoT).

He said the high policy interest rate may have its advantages but “we must admit that there are also disadvantages in every measure and a careful consideration is necessary.”

Mr Kittiratt was apparently referring to a statement by BoT Governor Prasarn Trairatvorakul on Thursday assuring that the present policy interest rate of 2.75 per cent would contribute to Thailand’s economic growth and a reduction was unnecessary for the time being.

The deputy premier said it is inappropriate for one person to set directions on state policies but the country’s economic mechanism is needed in adjusting the Thai currency to the most suitable level.

“Thai people should not be over-anxious [about the strong Thai baht]. The prime minister has expressed her concerns and instructed all related agencies to closely monitor the Thai currency's movements,” Mr Kittiratt said.

Dr Virabongsa Ramangkura, chairman of BoT Board and former finance minister, earlier called on the BoT to reduce the policy interest rate to narrow the variance with western countries, which set their interest rates at between 0.75-1.0 percent.

He lamented about his inability to speak with BoT executives to convince them, despite his chairmanship at the BoT Board.

Commerce Minister Boonsong Teriyapirom said he will meet with representatives of the Federation of Thai Industries and Thai Chamber of Commerce next week to obtain their feedback on the impact of the appreciating Thai baht on their businesses so that assistance measures can be worked out.

He said information from Thai industrialists will be used for a planned discussion with Thai commercial attachés in May to review the global market and Thailand’s export target.

However, the projected export growth of 8-9 percent will remain unchanged, he said, admitting that the strong Thai baht has affected purchase orders for Thai products in the second quarter of this year.

Small and medium businesses will feel the pinch and may have to increase the prices of their products to compensate for lost revenue, he said. (MCOT online news)

-- TNA 2013-02-02

[indyuk]

Only The Bank of Thailand should regulate real inflation/deflation. All other market sectors should function in harmony with 'ASEAN and'world markets.

[Locationthailand]

I doubt BoT will listen to the Government as by their performance to date, I think they have no idea of fiscal management and are simply answering to Dubai.

[Jaggg88]

For country that is so dependant on tourism a strong Baht is not good news, The economies in USA, EU and UK are all in recession or at least very weak and have historically low interest rates so international investors are looking for a better returns - consequently money is pouring into Thailand and thus pushing up the exchange rate. This must make many government ministers feel quite proud but as they say, pride comes before a fall. This can only be a short term situation as the same investors will jump ship at the first sign of trouble. eg Thailand's overblown house price bubble bursting, people's individual debt becoming toxic as growth reduces and shrinking balance of trade ( strong Baht = more expensive exports and reduced value for money for tourists) to name but a few. So sit tight and we'll soon be back to 50+ Baht to the GBP or there will be a crash like '97 - but lets hope not because that won't help anyone.

[waza]

Its not just the interest rates that are attracting investors, the flagged massive 2 trillion baht spend on infrastructure is attracting investors to buy into Thai companies via the SET.

[hellodolly]

“Thai people should not be over-anxious [about the strong Thai baht]. The prime minister has expressed her concerns and instructed all related agencies to closely monitor the Thai currency's movements,” Mr Kittiratt said."

The article goes on to say

"Commerce Minister Boonsong Teriyapirom said he will meet with representatives of the Federation of Thai Industries and Thai Chamber of Commerce next week to obtain their feedback on the impact of the appreciating Thai baht on their businesses so that assistance measures can be worked out."

On the one hand the PM is telling the people not to worry. Then the Commerce Minister goes on to say the Government is going to work out ways to help the Federation of Thai Industries.

Inflation the government looking in to ways to help industries with the countries tax dollars and she says don't worry.

Perhaps she should try to live on a wage of 300 baht a day. With the way prices are going up she would soon start worrying. Not only have prices risen in restaurants but in many of them the portion served has been cut back. Even on the food carts.