IMF warns of rising risks to Thai economy

[webfact]

IMF warns of rising risks to Thai economy
By English News



BANGKOK, June 18 – The International Monetary Fund (IMF) warned Thailand to be prepared for inflation and vulnerability from capital flows which may add uncertainty to Thai economy outlook.

An IMF delegation, led by Luis E. Breuer, met with executives of the Bank of Thailand (BoT) and senior Finance Ministry officials last week.

Mr Breuer said the Thai economy has shown an impressive resilience to shocks, including the global financial crisis, supply-chain disruptions following the tsunami in Japan, and the devastating 2011 floods.

Economic fundamentals are strong, including a track record of growth, stability and fiscal discipline, healthy balance sheets of commercial banks and corporations, high international reserves, and manageable public debt, he added.

Despite Thailand’s economic slowdown in Q1, the IMF mission chief was optimistic that GDP will expand by 4.75 per cent this year, and further by 5.25 per cent next year – supported by strong private demand and an acceleration of public spending.

“Against the backdrop of the global financial crisis and the devastating 2011 floods, the expansionary fiscal policy pursued in recent years was justified, aimed at supporting aggregate demand and reconstruction activities,” Mr Breuer said in a statement.

“But now, the strength of the ongoing economic recovery provides an opportunity to gradually withdraw the fiscal stimulus, create fiscal space for priority infrastructure spending, and rebuild policy buffers to address future possible shocks.”

He said the IMF mission welcomed the authorities’ commitment to fiscal discipline, including their objectives of keeping the public debt ratio under 50 per cent of GDP and balancing the central government budget by 2017.

“The authorities are taking actions to improve tax compliance and expand the tax base, reduce tax incentives for consumption, and revamp excises, while confirming their strict control over current spending,” according to the statement.

Mr Breuer said the IMF delegation discussed additional measures that would support the authorities’ goals of increasing public spending on infrastructure, while also preserving fiscal discipline.

“The Bank of Thailand’s accommodative monetary stance is appropriately supporting the economy,” he said, however, calling on the central bank to continue to be vigilant to demand and wage pressures, and stand ready to normalise interest rates if overheating pressures emerge or inflation picks up.

The mission chief continued, “In an era of volatile capital flows and rapid shifts in investors risk appetite, the inflation targeting regime and the credibility of the central bank have served Thailand well. The policy response to the recent episode of capital flows was appropriate, including exchange rate flexibility and the preparation of contingency measures.”

Though the financial sector has benefited from the strong recovery, the IMF mission warned that vulnerabilities are rising, including from the expansion of specialised financial institutions (SFIs) and rising household debt.

The IMF delegation said it supports the authorities’ intention to strengthen the operating environment of SFIs, including their management and mandates.

“Building on Thailand’s remarkable record of economic development in recent decades, the mission supports the authorities’ intention to raise growth and to make growth more inclusive. The implementation of infrastructure projects, in particular in the transportation sector, is expected to raise economy-wide productivity,” the mission said. (MCOT online news)


-- TNA 2013-06-18

[kotsak]

IMF is not my father..

[clockman]

The day is coming!!!!!!!!!!!!

[pedro01]

"He said the IMF mission welcomed the authorities’ commitment to fiscal discipline, including their objectives of keeping the public debt ratio under 50 per cent of GDP and balancing the central government budget by 2017."

Fiscal discipline????

[Mosha]

Two wheels on my wagon,

And I’m still rolling along

Them Cherokees are after me

Flaming spears, burn my ears

But I’m singing a happy song

[Gsxrnz]

"He said the IMF mission welcomed the authorities’ commitment to fiscal discipline, including their objectives of keeping the public debt ratio under 50 per cent of GDP and balancing the central government budget by 2017."

Fiscal discipline????

Actually, Public Debt at 50% or less of GDP is fiscally very good. Compared to the US at circa 74% and Japan at circa 214%, and NZ at circa 45% (2010 figures). No matter how we may view Thai politics and economics, it is a strong emerging economy with fairly sound fundamental ratios.

[EvilDrSomkid]

The IMF has a bit of a bad image in Thailand. It's a good thing they are mild in their 'advice'.

[waza]

Beware of inflation, capital flows, SFIs and rising household debt, but all in all its says noything

[iancnx]

Beware of inflation, capital flows, SFIs and rising household debt, but all in all its says noything

Agreed, a lot of complex chat, but nothing of substance. A copy of the executive summary of the report would have been more coherent and of more use.

[rubl]

"In an era of volatile capital flows and rapid shifts in investors risk appetite, the inflation targeting regime and the credibility of the central bank have served Thailand well."

Well, the BoT governor will be glad to have this on record for next time MoF Kittirat starts nagging :-)

BTW "preserving fiscal discipline" ? Like moving things out of sight, out of the National Budget? Special decree for 350 billion, borrowed 700 billion from BAAC, 2.2 trillion to come, 1.14 trillion under the BoT carpet, etc., etc.

[Jasun]

What do they mean by their suggestion to 'normalise interest rates'? Put them up? Won't that create some of the highest interest rates in the region, and potentially an even stronger baht?

[iancnx]

Here is his actual statement..... A little more comprehensive

http://www.imf.org/external/np/sec/pr/2013/pr13212.htm

[rubl]

Does the positive tone of the IMF Press Release signify that the IMF has actually got some data & information which made sense and could be believed, or is it just the usual diplomatic phrasing?

[winstonc]

he couldnt have been talking about thailand could he,,,,???

[bobl]

And Thailand should say "Thanks for the advice, and don't let the door hit you on the ass on the way out".

The IMF have a great track record in helping destroy economies...

[winstonc]

so moodys will listen to the imf ,,??,,im so confused,help me guys please,,,

[iancnx]

so moodys will listen to the imf ,,??,,im so confused,help me guys please,,,

Seems to me this statement has been made based on financial data to date, or some of it. Historic at any rate. The 2.2 trillion, the water mega projects and the rice mis-management not in the reckoning it seems

In all fairness they cannot report on what has not yet happened (the truth of the rice still not ascertained at time of statement).

Moody's might be a little more robust!

[geriatrickid]

Does the positive tone of the IMF Press Release signify that the IMF has actually got some data & information which made sense and could be believed, or is it just the usual diplomatic phrasing?

Yes, the IMF made its statement based upon reliable data & information.

Considering that Thailand's debt situation and GDP growth is better than some western countries, the IMF comments should be taken in that context.

The comments did include some tough advice too. A forceful nudge on some issues if you will.

[geriatrickid]

Just look at Greece and see for your self what the IMF is doing,,,,,,,,,,,,,

Greece has no one to blame for its financial condition but itself. If a country wants a bail out because of its own greed, corruption and sloppy fiscal policy then it must accept that the entities providing the bail out will impose some conditions.

[Thai at Heart]

The sky isn't falling.

I think Moody's and the IMF are doing them a big favour by going public about the need to be prudent.

Is anyone listening?

[rubl]

Does the positive tone of the IMF Press Release signify that the IMF has actually got some data & information which made sense and could be believed, or is it just the usual diplomatic phrasing?

Yes, the IMF made its statement based upon reliable data & information.

Considering that Thailand's debt situation and GDP growth is better than some western countries, the IMF comments should be taken in that context.

The comments did include some tough advice too. A forceful nudge on some issues if you will.

I like your sense of humour and definition of 'tough' and 'forceful'

[bander]

Anybody know what time IMF released this news?

I noticed that SET index fell from 1490 to 1427 (63 points) this afternoon just after 3 o'clock.

[EvilDrSomkid]

Just look at Greece and see for your self what the IMF is doing,,,,,,,,,,,,,

You should know what mayhem they caused in this country.

I'm reading Chris Baker and Pasuk's 'Thailand's Crisis'.

Very educational. The IMF completely misread the situation in 97 and pushed the wrong policies down the Dems' throats.

That took about a year. After that, the Dems resisted the IMF.

Then, the IMF had the nerve to declare the crisis over in 99 and state it was thanks to them.

Au contraire, Mr. Camdessus.

[iancnx]

Anybody know what time IMF released this news?

I noticed that SET index fell from 1490 to 1427 (63 points) this afternoon just after 3 o'clock.

IMF website published on 17th.

IMF Concludes 2013 Article IV Mission to Thailand

Press Release No. 13/212

June 17, 2013

http://www.imf.org/external/np/sec/pr/2013/pr13212.htm

[wolf5370]

"He said the IMF mission welcomed the authorities’ commitment to fiscal discipline, including their objectives of keeping the public debt ratio under 50 per cent of GDP and balancing the central government budget by 2017."

Fiscal discipline????

Actually, Public Debt at 50% or less of GDP is fiscally very good. Compared to the US at circa 74% and Japan at circa 214%, and NZ at circa 45% (2010 figures). No matter how we may view Thai politics and economics, it is a strong emerging economy with fairly sound fundamental ratios.

2012 estimates (from IMF and CIA): http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

PD = % Public Debt against GDP GD=% Government Debt against GDP

UK: PD 88.7 GD 82.785

USA: PD 73.6 GD 107.859

Jpn: PD 214.3 GD 134.325

Ger: PD 81.7 GD 57.224

Aus: PD 26.9 GD 11.641

Chi: PD 31.7 GD 21.301

Tha: PD 43.3 GD 45.868

[kevinsan]

The IMF must have access to the real numbers. Wherever they may reside.

[givenall]

IMF is not my father..

As the government says no worries, everything is fine. let the good time roll

[Thai at Heart]

Anybody know what time IMF released this news?

I noticed that SET index fell from 1490 to 1427 (63 points) this afternoon just after 3 o'clock.

When the genuine farang newbies piss of and the set is 1200 that is the the time to buy

[bigbamboo]

Let's cut to the chase.

Would the IMF lend Thailand that 2.2 trillion baht it wants or not?

[davejones]

The article says the exact opposite of the headline. IMF seems very pleased with Thai economy.