STIMULUS
BOT may resort to stimulus
The Nation


Prasarn

BANGKOK: -- THE BANK OF THAILAND could turn on the stimulus tap, as risks are rising that the economy might not reach 1.5-per-cent growth this year, and that exports might even contract.

"We are watching closely. If economic growth continues at a low level, it may be necessary for additional monetary policy," BOT Governor Prasarn Trairatvorakul said yesterday.

In its most recent meeting, the central bank's Monetary Policy Committee (MPC) expressed concern over economic expansion, which remained weaker than expected. It decided to leave the policy interest rate at 2 per cent.

Easing monetary measures remain appropriate for the economy if it continues decelerating, and it is possible for the central bank to unleash additional monetary stimulus to prop up the economy, Prasarn said.

Fiscal policy is the key issue the BOT has been considering in deciding whether to adjust monetary policy and, recently, state budget disbursement has been slower than expected.

In late October, after fiscal 2015 began, the government planned to accelerate short-term disbursement. If the fiscal measures could not stimulate the economy, monetary stimulus might need to step in, Prasarn said.

However, he noted, monetary measures were not a magic pill for all problems, so it was more proper to employ fiscal stimulus.

In the past three to four years, although Thailand has confronted political problems or external impacts, it was a proper direction for increasing monetary accommodation, as that helped absorb shocks from external factors.

Since the second quarter of last year, the MPC has slashed the policy rate three times, from 2.75 per cent to 2.00 per cent.

In its surveys of business operators, the central bank has rarely heard about impacts from the rate cuts, which generally benefited business operators. Only the labour shortage and state assistance problems have been reported.

The economy, in the past three to four years, has faced uncertainties in growth, from both internal and external factors. In the first half of this year, Thailand saw political impacts drag its economy into negative-growth territory. The economy started recovering in the second quarter.

The central bank forecasts the economy expanding in the second half of this year, but it is expected to remain at risk of missing the 2014 growth target of 1.5 per cent.

Exports have also been picking up more slowly than expected mainly because of drops in the prices of rubber and rice, and structural problems involving electronics goods. This year may see exports shrink.

With Europe's economic slowdown and political conflicts with Russia, foreign-tourist arrivals are expected to come in at 25 million this year, against the target of 27 million.

This will leave Thailand dependent on domestic drivers, including investment and consumption, for growth.

However, the government is trying to accelerate investment this fiscal year and rush spending of the carry-over budget. It is also speeding up approval by the Board of Investment of projects to help boost the economy.

Source: http://www.nationmultimedia.com/business/BOT-may-resort-to-stimulus-30247527.html


-- The Nation 2014-11-12

It would be great if there was some 'economic realism' in place. There is so much propaganda floating around, it's hard to discern what shape the economy is really in.

"This will leave Thailand dependent on domestic drivers, including investment and consumption, for growth."

And this will leave the Gen. Prayuth's regime with only one alternative to meet the Junta's GDP growth expectations for 2015 - borrow, borrow, borrow to spend, spend, spend. Gen. Prayuth seems to have made 2015 a "make or break" year for reviving the economy. If the government's attention is too distracted by a continuing sluggish economy beyond 2015 it may not have sufficient creditibality to deliver its reform plans for the country. Managing a nation's economy is not like managing a military budget.

Oh good, a Baht devaluation coming our way

what effect will this have on the currency

should we move to the US$?

And this will leave the Gen. Prayuth's regime with only one alternative to meet the Junta's GDP growth expectations for 2015 - borrow, borrow, borrow to spend, spend, spend. ...

Managing a nation's economy is not like managing a military budget.

Which, if the economy should fall into recession, would be exactly the right policy. Thailand's national debt is only about 45% of GDP. There would be plenty of room to borrow at low rates to fund infrastructure projects, where Thailand needs a lot of development, or investment in developing human capital through improving education and health care, etc.

Managing a nation's economy is nothing like managing a household either. When growth is slowing down or contracting, "saving" money by not increasing govt spending causes the situation to worsen by further reducing demand. As we have seen in the UK, in Greece, in France and Germany, in Ireland, in Japan, etc.

Other productive policies are also possible, such as taxing the rich to finance development projects. Seems unlikely, but the inheritance tax could be a good start.

Boiled down to the kernel, what he is saying is that the 'government' is failing to employ the proper fiscal measures to stimulate the economy - and that while the BoT could further ease monetary conditions by cutting the policy rate, it is unlikely to be much help given how low it is already. Unfortunately I am far from convinced that advance fiscal management was very far up the class agenda at the military academy. It seems to elude the men in green that government spending (in the right circumstances) can actually raise tax receipts by promoting fater growth and more domestic consumption and investment by the private sector.

The Thai economy is probably in a worse state than the spin doctors would try to have us all believe for this to happen.

Its all too plain to see if you look at all the Government incentives and varius schemes that have been initiated and proposed over the last 18 months to stimulate growth, and all to no avail, as the economy is bumping along the floor now, and has been for the last 2 years.

Certainly for 2015, and going into Asean with one of the weakest economies in SE Asia, things dont look rosy at all.

Doesn't matter if its Junta or Thaksins Thugs ,the Banks do what they like. always have, always will.

The Thai economy is probably in a worse state than the spin doctors would try to have us all believe for this to happen.

Its all too plain to see if you look at all the Government incentives and varius schemes that have been initiated and proposed over the last 18 months to stimulate growth, and all to no avail, as the economy is bumping along the floor now, and has been for the last 2 years.

Certainly for 2015, and going into Asean with one of the weakest economies in SE Asia, things dont look rosy at all.

A ridiculous claim. Thailand has a GDP second only to Indonesia among ASEAN countries. In terms of GDP per capita it ranks behind Singapore and Malaysia, but far above the other ASEAN countries and slightly above China.

https://en.wikipedia.org/wiki/List_of_Asian_countries_by_GDP_per_capita

Thailand experienced consistently strong GDP growth during the Thaksin years. After that, the attacks by the right wing on the functioning of government have damaged the economy.

Oh good, a Baht devaluation coming our way

That's exactly what came to my mind.