No new moves from Thailand’s central bank despite weakened baht

[webfact]

No new moves from Thailand’s central bank despite weakened baht
By English News



BANGKOK, Aug 27 – The Bank of Thailand (BoT) today ruled out issuing measures to cope with the sliding baht and foreign capital outflows.

Pongpen Ruengvirayudh, BoT deputy governor for monetary stability, said the baht’s depreciation to Bt32 against the dollar, or down 4 per cent since early this year, as well as the capital outflows, were normal phenomena.

Foreign investors regularly compare profits from their investments in various ventures, while the US Federal Reserve has signalled a relaxation of its quantitative easing (QE) measures since May, resulting in foreign capital outflows by 15 per cent mostly from bonds and stocks, she said.

She gave assurances that the BoT’s assets and monetary reserves at US$125 billion would be sufficient to cope with the capital outflows and that the outflows from Thailand were less severe compared to other newly-emerged markets.

However, she urged the private sector to hedge risks despite the central bank’s attempt to prevent volatile currency movement.

Ms Pongpen expressed confidence in the strength of Thailand’s economic fundamentals given the current account surplus and believed that foreign investors would take into consideration the country’s economic expansion.

The government’s investment in infrastructure will reduce transportation costs and boost the kingdom’s competence, she said, contributing to economic expansion and investors’ confidence in the Thai economy.

The baht depreciation was beneficial to the BoT which suffered a Bt530.892 billion loss at the end of last year, she said, noting that the central bank was studying the possibility of using excess international reserves to invest in equities or a new opportunity fund.

The concluded study will be submitted to the BoT’s Board of Directors for approval, she said. (MCOT online news)

-- TNA 2013-08-27

[Robby nz]

The government’s investment in infrastructure will reduce transportation costs and boost the kingdom’s competence, she said, contributing to economic expansion and investors’ confidence in the Thai economy.

This is of course part of the 2.2 trillion that is supposed to be borrowed.

I do wonder who is going to lend them the money and what interest rates they will have to pay?

They have borrowed the 350 billion for the flood projects from Thai banks, the majority from Govt owned banks (Thai peoples savings).

There was supposed to be a bidding round for this borrowing and the fact that the money all came from local banks would seem to indicate there were no suitable bids from overseas.

If this is the case then will they be able to get bids from overseas for the 2.2 trillion?

Surely the local banks cant be expected to cover the loans if there is no interest from overseas, what with the flood money and the rice loses the local banks, particularly the Govt banks must be scraping the bottom of the money barrel.

[chiang mai]

125 bill or 170 bill, I think the latter (unless 50 bill. went walkies).

[WinnieTheKhwai]

I'm not too worried about the sliding baht; looks like the West is going to war again, or at the very least raising tensions, so that's a further hit to those economies.

[dcutman]

confidence in the strength of Thailand’s economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

[Thai at Heart]

confidence in the strength of Thailands economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

[chiang mai]

confidence in the strength of Thailand’s economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

The foriegn reserves stand at USD 172 billion as of July, not 125 and they are real and not alledged, more than the US or the UK.

http://www.tradingeconomics.com/thailand/foreign-exchange-reserves

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

As for sound fundamentals: large inexpensive and available workforce, low external debt, established exports markets and a GDP of 4.5% - nothing's ideal of course but compare the Thai economic profile to many other countries and it's very good, even against many western countries currently.

[clockman]

But as there is no transparency in Thailand, how does anybody know the true state of the economy?

[dcutman]

confidence in the strength of Thailands economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

Thats what I am saying, What are the strong economic fundamentals? The "run up" in the SET in large part is foreign (hot) money? And has not the SET nose dived about 250 points,or more, in the last 3 months? Based on a rumor the Fed is gonna hit the breaks on this.

It seems to me the economic success in Thailand and all other SE Asian countries has been from from almost free money from the U.S. witch sooner or later will come to an end.

Today in the other paper, export growth has been revised down from over 7% to under 2%. The trade deficit has jumped as well as the budget the deficit . Personal and corporate debt levels are at or over 150% GDP. What does strong economic fundamentals mean in Thailand?

[chiang mai]

But as there is no transparency in Thailand, how does anybody know the true state of the economy?

Perhaps because the World Bank has done audits as a condition of their lending following the Asian crisis.

But to be honest, does transparency exist anywhere given the extent of off balance sheet fianancing deals that have emerged in the West.

[dcutman]

confidence in the strength of Thailand’s economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

The foriegn reserves stand at USD 172 billion as of July, not 125 and they are real and not alledged, more than the US or the UK.

http://www.tradingeconomics.com/thailand/foreign-exchange-reserves

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

As for sound fundamentals: large inexpensive and available workforce, low external debt, established exports markets and a GDP of 4.5% - nothing's ideal of course but compare the Thai economic profile to many other countries and it's very good, even against many western countries currently.

Large inexpensive workforce? HUH? last I read Thailand needs hundreds of thousands of laborers.(1.5 million in the next 10 years) As well as teachers, doctors, nurses, engineers, truck drivers ect ect ect.

Exports have been revised down to under 2% and the GDP to 3.8% (Thats the 3rd downgrade this year). There is no comparison to a SE Asia economy to a western economy, but good try.

[chiang mai]

confidence in the strength of Thailands economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

Thats what I am saying, What are the strong economic fundamentals? The "run up" in the SET in large part is foreign (hot) money? And has not the SET nose dived about 250 points,or more, in the last 3 months? Based on a rumor the Fed is gonna hit the breaks on this.

It seems to me the economic success in Thailand and all other SE Asian countries has been from from almost free money from the U.S. witch sooner or later will come to an end.

Today in the other paper, export growth has been revised down from over 7% to under 2%. The trade deficit has jumped as well as the budget the deficit . Personal and corporate debt levels are at or over 150% GDP. What does strong economic fundamentals mean in Thailand?

Please do more thorough research and correct your so called facts before rumour mongering..

[chiang mai]

confidence in the strength of Thailand’s economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

The foriegn reserves stand at USD 172 billion as of July, not 125 and they are real and not alledged, more than the US or the UK.

http://www.tradingeconomics.com/thailand/foreign-exchange-reserves

http://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

As for sound fundamentals: large inexpensive and available workforce, low external debt, established exports markets and a GDP of 4.5% - nothing's ideal of course but compare the Thai economic profile to many other countries and it's very good, even against many western countries currently.

Large inexpensive workforce? HUH? last I read Thailand needs hundreds of thousands of laborers.(1.5 million in the next 10 years) As well as teachers, doctors, nurses, engineers, truck drivers ect ect ect.

Exports have been revised down to under 2% and the GDP to 3.8% (Thats the 3rd downgrade this year). There is no comparison to a SE Asia economy to a western economy, but good try.

Every country that has a sound economy runs out of workers on the bottom end of the ladder, now that Myanmar is undergoing change many of the Burmese laborers have returned home and there's few if any people left to replace them.

As for comparisons with western economies: boil it all down into very simple terms of money in and money out, forget your patriotism for a moment and tell me who wins.

Haven't seen the alledged recent downgrade but will look and revert.

[dcutman]

confidence in the strength of Thailands economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

Thats what I am saying, What are the strong economic fundamentals? The "run up" in the SET in large part is foreign (hot) money? And has not the SET nose dived about 250 points,or more, in the last 3 months? Based on a rumor the Fed is gonna hit the breaks on this.

It seems to me the economic success in Thailand and all other SE Asian countries has been from from almost free money from the U.S. witch sooner or later will come to an end.

Today in the other paper, export growth has been revised down from over 7% to under 2%. The trade deficit has jumped as well as the budget the deficit . Personal and corporate debt levels are at or over 150% GDP. What does strong economic fundamentals mean in Thailand?

Please do more thorough research and correct your so called facts before rumour mongering..

[chiang mai]

[dcutman]

"rumour mongering"? Really!!?

You might want to look at the BP business section, Obviously you know why I cannot supply links.

[StevenWayneSimpson]

People are not running back to Burma. It is not as rosey as some may like to feel. Communication is still very poor, land prices are out of control and although some investment has come it is not on any huge scale.

[chiang mai]

People are not running back to Burma. It is not as rosey as some may like to feel. Communication is still very poor, land prices are out of control and although some investment has come it is not on any huge scale.

Indeed, but it has/is starving the construction industry.

[Thai at Heart]

People are not running back to Burma. It is not as rosey as some may like to feel. Communication is still very poor, land prices are out of control and although some investment has come it is not on any huge scale.

What does that have to do with Thailand current predicament? Falling exports, inflation despite a relatively high interest rate, lack of increases in productivity, lack of enough skilled labour, restrictive investment rules?

If the baht drops enough, inflation will jump. Then what to do? Increase interest rates and risk pinching off what growth there is?

[dru2]

confidence in the strength of Thailands economic fundamentals

Besides the alleged $125 billion in reserves, what other fundamentals are so strong here in LOS? I have read this " The sound Thai economic fundamentals" no less than a hundred times. Does anybody know what these are?

BTW how much foreign "hot money" is in Thailand?

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

Thats what I am saying, What are the strong economic fundamentals? The "run up" in the SET in large part is foreign (hot) money? And has not the SET nose dived about 250 points,or more, in the last 3 months? Based on a rumor the Fed is gonna hit the breaks on this.

It seems to me the economic success in Thailand and all other SE Asian countries has been from from almost free money from the U.S. witch sooner or later will come to an end.

Today in the other paper, export growth has been revised down from over 7% to under 2%. The trade deficit has jumped as well as the budget the deficit . Personal and corporate debt levels are at or over 150% GDP. What does strong economic fundamentals mean in Thailand?

Please do more thorough research and correct your so called facts before rumour mongering..

And just how is your "research" any more - or less - valid than dcutman's? A clear case of the pot calling the kettle black. Or is it Red Shirt economic analysis?

Edited August 27, 2013 by dru2

[Langsuan Man]

A few months back everyone here was screaming that the central bank should be doing something about the appreciation of the Thai baht, yet here we are a month or so later and everyone is screaming for the central bank to do something about the depreciation of the Thai baht

Someone is always not going to be happy, one way or another

[Pib]

A few months back everyone here was screaming that the central bank should be doing something about the appreciation of the Thai baht, yet here we are a month or so later and everyone is screaming for the central bank to do something about the depreciation of the Thai baht

Someone is always not going to be happy, one way or another

Amen Brother!

But as a person who has US dollars I'll join the crowd screaming for some more depreciation of the baht. 35 baht/USD sounds nice...that about another 10%....got a nice ring to it...a person can dream. However, I'll be pleasantly surprised and quite content if the exchange rate reaches 33 baht/USD.

[chiang mai]

Ummmm. Rather a lot. Look at the run up of the SET over the last few years.

Thats what I am saying, What are the strong economic fundamentals? The "run up" in the SET in large part is foreign (hot) money? And has not the SET nose dived about 250 points,or more, in the last 3 months? Based on a rumor the Fed is gonna hit the breaks on this.

It seems to me the economic success in Thailand and all other SE Asian countries has been from from almost free money from the U.S. witch sooner or later will come to an end.

Today in the other paper, export growth has been revised down from over 7% to under 2%. The trade deficit has jumped as well as the budget the deficit . Personal and corporate debt levels are at or over 150% GDP. What does strong economic fundamentals mean in Thailand?

Please do more thorough research and correct your so called facts before rumour mongering..

. Or is it Red Shirt economic analysis?

Only if they teach Red Shirt economics to farangs from the Cotswolds!

[Thai at Heart]

A few months back everyone here was screaming that the central bank should be doing something about the appreciation of the Thai baht, yet here we are a month or so later and everyone is screaming for the central bank to do something about the depreciation of the Thai baht

Someone is always not going to be happy, one way or another

Amen Brother!

But as a person who has US dollars I'll join the crowd screaming for some more depreciation of the baht. 35 baht/USD sounds nice...that about another 10%....got a nice ring to it...a person can dream. However, I'll be pleasantly surprised and quite content if the exchange rate reaches 33 baht/USD.

This is for precisely the reason I mentioned earlier, letting the baht drop to low will cause a huge increase in domestic inflation because they have to hold a huge wedge of oil for electricity generation and logistics. So, as nice as it may be to have a momentarily cheaper currency, if you are an exporter, a huge percentage of your stuff that you buy to bring into the country to make stuff will increase in baht terms. They have created this mess by not reforming the systems in the country.

Great, let the baht go, electricity will shoot up, oil and gas for boilers to trucks will shoot up, and lo and behold, prices in the country move, but exporter margins will improve a bit, but not that much. I export products to Europe and the US. Over 50% of the bits and pieces I need to make my stuff are imported. All attracting between 8 and 15% import duty. Great huh.... Now the truck to deliver it to my factory will be a bit more expensive.

Edited August 27, 2013 by Thai at Heart

[Pib]

But the baht's value has been significantly lower in the recent past...say over the last 10 years or even the last 5 years....and like over the last 5 years it didn't cause a big increase in domestic inflation. In fact, with the baht's value getting stronger over the last few years inflation has went significantly up...and definitely higher inflation than what the govt/BOT Thailand stats will show for many of the products/services people buy. See below baht/USD exchange rate chart.

While a country's currency can definitely have a major impact on inflation when the currency greatly depreciates, when it comes to small to moderator depreciation and depending on a whole variety of economic factors possibly unique to that country...like is the country export dependent...it can actually be good for the country. The core problem behind a country's inflation can be caused by so many things....arguably the recent 300 baht/day minimum wage increase is the major cause behind the inflation over the last year or so....it can't be because of the baht's value because the baht was appreciating over much of the last few years.

A stronger baht may not be the best; maybe a weaker baht is best for the country...but I doubt you will get export dependent companies to support a stronger baht and the country is highly export dependent. Where that "just right" exchange rate for the country as a whole is I couldn't say....and whatever that "sweet spot" is it will also change over time.

[spirit47]

I love it, and for Export (rice), it would be a chance, but the Thais are to slowly, look at the Rupie chart...

[Thai at Heart]

But the baht's value has been significantly lower in the recent past...say over the last 10 years or even the last 5 years....and like over the last 5 years it didn't cause a big increase in domestic inflation. In fact, with the baht's value getting stronger over the last few years inflation has went significantly up...and definitely higher inflation than what the govt/BOT Thailand stats will show for many of the products/services people buy. See below baht/USD exchange rate chart.

While a country's currency can definitely have a major impact on inflation when the currency greatly depreciates, when it comes to small to moderator depreciation and depending on a whole variety of economic factors possibly unique to that country...like is the country export dependent...it can actually be good for the country. The core problem behind a country's inflation can be caused by so many things....arguably the recent 300 baht/day minimum wage increase is the major cause behind the inflation over the last year or so....it can't be because of the baht's value because the baht was appreciating over much of the last few years.

A stronger baht may not be the best; maybe a weaker baht is best for the country...but I doubt you will get export dependent companies to support a stronger baht and the country is highly export dependent. Where that "just right" exchange rate for the country as a whole is I couldn't say....and whatever that "sweet spot" is it will also change over time.

Capture.JPG

Oil has been falling also in USD. The strong baht helped to stop oil price inflation domestically.

Just wait for it. The pump prices will bump 10%. Oil makes up a massive amount of imports and it feeds into every price in the country. Bear in mind Thailand is an assembler in just about every product except automobiles.

If you rely on imported oil for electricity, and have little or no bulk freight from rail, exchange rates are very important issues for inflation. Just go look at India's problems.

But then the steel for the cars is imported also.

Edited August 27, 2013 by Thai at Heart

[yoshiwara]

But the baht's value has been significantly lower in the recent past...say over the last 10 years or even the last 5 years....and like over the last 5 years it didn't cause a big increase in domestic inflation. In fact, with the baht's value getting stronger over the last few years inflation has went significantly up...and definitely higher inflation than what the govt/BOT Thailand stats will show for many of the products/services people buy. See below baht/USD exchange rate chart.

While a country's currency can definitely have a major impact on inflation when the currency greatly depreciates, when it comes to small to moderator depreciation and depending on a whole variety of economic factors possibly unique to that country...like is the country export dependent...it can actually be good for the country. The core problem behind a country's inflation can be caused by so many things....arguably the recent 300 baht/day minimum wage increase is the major cause behind the inflation over the last year or so....it can't be because of the baht's value because the baht was appreciating over much of the last few years.

A stronger baht may not be the best; maybe a weaker baht is best for the country...but I doubt you will get export dependent companies to support a stronger baht and the country is highly export dependent. Where that "just right" exchange rate for the country as a whole is I couldn't say....and whatever that "sweet spot" is it will also change over time.

Capture.JPG

Oil has been falling also in USD. The strong baht helped to stop oil price inflation domestically.

All change!

[Phatcharanan]

Please do more thorough research and correct your so called facts before rumour mongering..

You mean facts as stated by Wikipedia?