Thai govt prepared to cope with funds inflows from euro-zone stimulus programme

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Govt prepared to cope with funds inflows from euro-zone stimulus programme
Business Reporters
The Nation

BANGKOK: -- The Thai government is moving to brace for an influx of funds from the Europe Union's bigger-than-expected bond purchasing programme, fearing this might strengthen the baht and affect Thai export growth this year.

Prime Minister General Prayut Chan-o-cha has asked the Finance Ministry and the Bank of Thailand

to prepare measures for possible impact from the euro zone's quantitative easing (QE) programme, during a meeting yesterday.

The European Central Bank (ECB) on Thursday said it would buy 60 billion euros (US$69 billion) in private and public sector bonds per month from March until the end of September next year. The amount is above market expectation of no more than 50 billion euros.

The SET Index yesterday (23) rose by 37.99 points or 2.43 per cent to close at 1,598.33 points. The baht has appreciated from Bt32.97 per US dollar on January 5 to Bt32.60 yesterday while the country's policy interest rate is currently at 2 per cent.

Wall Street jumped 1.5 per cent and European shares climbed to a seven-year high on Thursday. All Asian markets went up yesterday after the ECB launched a landmark bond-buying stimulus programme that buoyed investors' risk appetite, drove bonds higher and kept the euro pinned to near 11-year lows.

Fiscal Policy Office director-general Kritsada Jinavijarana said the fiscal measures, including assistance to Thai exporters and cost reduction for business operators, had been taken.

"Tax cuts for small and medium-sized enterprises, tax reduction on raw materials and machinery, and nano-finance are also included," he said.

He said there might be some BOT monetary measures, particularly when the baht is affected by capital movement. The situation could bring about a currency war in several countries.

"The extent of the impact on Thailand will depend on the amount of capital flowing into the country.

QE of 60 billion euros monthly is big enough to affect the Thai currency," said Kritsada.

Finance Minister Sommai Phasee said the euro zone's aggressive QE policy could lead to appreciation of the baht due to increase in global liquidity, which could find its way to emerging and promising markets, including Thailand. This situation could lead to lower exports.

However, he said the BOT has a choice to use its international reserves as well as reduce the policy rate to take care of the situation since the situation can have a negative impact on the real sector.

Meanwhile, BOT spokesman Chirathep Senivongs na Ayudhya said "there was no irregularity in the baht situation" yesterday. "The BOT, however, will keep a close eye on the global funds flow and its impact on the baht in the coming period," he added.

CIMB Thai Bank's head of research centre Amonthep Chawla said that even though the bond buying would be in Europe, the high liquidity would bring capital inflows to Asia and emerging markets, including Thailand.

Source: http://www.nationmultimedia.com/business/Govt-prepared-to-cope-with-funds-inflows-from-euro-30252606.html


-- The Nation 2015-01-24

[Cake Monster]

Money inflows from Europe will probably see the baht going stronger to about 30 to $.

This will surely effect exports, and the already struggling Tourism market, and with the household debt of around 89% of GDP, the BOT will have no room to intervene.

Fate will take its path.

[timewilltell]

I don't think there will be huge swathes of money coming into Thailand because of this but in any case it will likely be a short lived phenomenon because the U.S. rates will be rising in the third quarter likely and the money will flow there since that economy is doing better than most others and is the best protected. Asia was OK as a risky bet while the powerhouse economies were offering no interest but that is about to change and then you will see the baht weaken significantly.

[kinmaew]

What is Pon Eks economic policies exactly? "Get Euro money from Farang?" just like the rest of the population?

[wabothai]

Are they conveniently forgetting about the unofficial "free" influx of Euros from expats?

[12DrinkMore]

I don't think there will be huge swathes of money coming into Thailand because of this but in any case it will likely be a short lived phenomenon because the U.S. rates will be rising in the third quarter likely and the money will flow there since that economy is doing better than most others and is the best protected. Asia was OK as a risky bet while the powerhouse economies were offering no interest but that is about to change and then you will see the baht weaken significantly.

I doubt if the Fed will raise interest rates in the next year or two.

- The USD is already a lot stronger, and this will import deflation.

- Oil prices have plummeted => more deflation.

- There are no signs of inflation taking off.

The economy is not exactly humming along, with a huge swathe of the population on food stamps.

Yellen will surely wait until wages are rising and she has managed to implant >2% inflation expectations into the minds of the peeps before considering a tentative interest rate increase.

[maidee]

with a historical low euro , the thais are afraid they will get too much of the free money to be invested in thailand?

last feb, the euro was at 44, now it is almost at 36

if you send 10.000 euros now over, you get 80.000 baht LESS !!!!!

[Ulic]

Smart Thai companies will use this period of a strong Baht to upgrade equipment and machinery that will make them more

efficient and productive. This will help them lower the cost per widget now and put them in even better position when more

normal exchange rates return. Dumb companies will panic as sales to Europe decline and profits sink, putting upgrades

on hold and hunkering down trying to weather the downturn in sales. Which strategy do you think most companies in Thailand

well take.

[harryfrompattaya]

Money inflows from Europe will probably see the baht going stronger to about 30 to $.

This will surely effect exports, and the already struggling Tourism market, and with the household debt of around 89% of GDP, the BOT will have no room to intervene.

Fate will take its path.

Yes we all know the Rothschilds and Swiss Bankers shall be investing everything they have in Thailand

The Baht will see 20 to Dollars

Invest in Thailand land put it in GF or Wife and watch her family lose it