Situation ripe for growth-driving strategies, BOT governor says

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Situation ripe for growth-driving strategies, BOT governor says
ERICH PARPART
THE NATION



BANGKOK: -- ECONOMIC stimulus comes with inherent risks, but the Bank of Thailand's new governor Veerathai Santiprabhob believes that the latest schemes have low exposure and the financial system is strong enough to withstand any undesirable side effects.

In his first meeting with the media since his five-year term started on October 1, Veerathai implied that the economy needed a boost. While supporting the Finance Ministry's measures, he said there was room to maintain the country's relaxed monetary policy.

"Our important mandate is to maintain economic stability in the short and long terms. But in a period when there is no major concern regarding stability, that means that there are ways to follow policies that are helpful for the economic recovery," he told reporters.

"This does not mean that this is what I am going to do in the first six months, but it is something that the central bank has been continuing to do, such as lowering the policy interest rate, which has already been done twice this year," he said.

An opponent of populist policies, Veerathai, a former economist of the International Monetary Fund (IMF), said mismanaged stimulus measures could hamper state banks' financial stability, but the latest measures had low risk and should help with economic expansion next year.

Among the schemes are the soft loans charging 4-per-cent interest with a budget of Bt100 billion from the Government Savings Bank (GSB) and Bt10 billion from the Government Housing Bank. Veerathai said GH Bank's programme was small compared with the bank's outstanding loans of Bt800 billion.

According to GH Bank, its non-performing loans at the end of 2014 totalled Bt42 billion or 5.4 per cent of outstanding loans, up by 7 per cent from 2013.

Veerathai believes that the fiscal measures help gross domestic product grow by 3.6-3.7 per cent in 2016, aside from a few other factors. These are the low base, government investment in infrastructure mega-projects and follow-up private investment, improvements in exports from the US recovery, and the continued excellent performance of the tourism industry.

"The government's stimulus measures are not something that you can press [a button on] and they will turn on immediately, so the effects have been factored into our economic predictions for next year, when we expect the economy to expand by around 3.6-3.7 per cent," he said.

The country needs to invest in infrastructure and find ways to increase productivity and labour efficiency to maintain its economic potential and cope with the new global economic norms, such as low commodity prices, which are expected to continue next year, he said.

Overall, he said he was convinced that Thailand's fiscal position is better than in 1997. He was then on the IMF team tasked with supervising emerging markets.

The IMF expects Thailand's current-account surplus to swell to US$17.2 billion this year or 4.4 per cent of GDP.

Outflows are low compared with the size of the surplus. The share of non-resident holdings of government and quasi-government bonds is small at around 7-8 per cent, while private bonds are largely dependent on the domestic market.

Foreign holdings in Thai shares have also fallen from around 37 per cent last year to 30 per cent from the outflows since the beginning of this year. Most of them are strategic holders. The central bank this year has cut the 2015 GDP growth projection twice from 4 per cent to 2.7 per cent. The policy interest rate is now 1.50 per cent, near the record low of 1.25 per cent in April 2009, which has helped weaken the US dollar/baht exchange rate.

"There is no escaping the fact that major changes in regional currencies will affect the baht. But other currencies in Asia have fluctuated more in the previous period, when the volatility rates of the Malaysian ringgit and Indonesia rupiah were double that of the baht," Veerathai said.

Source: http://www.nationmultimedia.com/business/Situation-ripe-for-growth-driving-strategies-BOT-g-30271362.html

-- The Nation 2015-10-22

[soalbundy]

What is that squeaking noise.

[Srikcir]

"fiscal measures help gross domestic product grow by 3.6-3.7 per cent in 2016"

BOT changed the players but continues to play the same game - the economy will recover in 2016.

Two weeks ago two other sources think differently. The IMF also slashed the 2016 growth projection for Thailand from 4% to 3.2% and Pimonwan Mahujchariyawong, Deputy Managing Director of Kasikorn Research Center forecasted GDP growth at 3% in 2016. But both have consistently overestimated Thailand's GDP growth throughout 2014 and 2015 so they may be viewed as being optimistic.

BOT's game is poker and bluff is its strategy.

[Jimbo2014]

I thought drugs were illegal in Thailand but BOT seem to have ready access to help fuel there meetings. I guess BOT and Goldman Sachs dont see eye to eye. I know which one i would invest my cash in.

[ChrisY1]

I've always been skeptical of Thailand' economic stimulus efforts........I hope there's some success with the latest pump-ups, but with some global economies at the point of tanking, I remain skeptical..........let's see in 6 months.

[elgordo38]

I thought drugs were illegal in Thailand but BOT seem to have ready access to help fuel there meetings. I guess BOT and Goldman Sachs dont see eye to eye. I know which one i would invest my cash in.

They are both singing off the same hymnal page. What does GS do anymore but pay big fines for illegal actions and mismanagement other peoples money?

[elgordo38]

I've always been skeptical of Thailand' economic stimulus efforts........I hope there's some success with the latest pump-ups, but with some global economies at the point of tanking, I remain skeptical..........let's see in 6 months.

Its amazing how they keep dusting off and trotting out procedures that have failed time and again in the past. Its the same world wide. By the time the Fed's actions blow up in the face of Americans Yellen and company will be long gone.