Thai cen­tral bank to act on ex­ter­nal shocks: Gov­er­nor

The Pak Banker - - COMPANIES/BOSS -

Thai­land's cen­tral bank is keep­ing its pow­der dry on in­ter­est rates and is ready to act in the event of ex­ter­nal shocks in­clud­ing a sus­tained de­cline in oil prices and even slower growth in China, Gov­er­nor Veerathai San­tiprab­hob said.

The Bank of Thai­land has "lim­ited scope" to re­duce rates be­cause bor­row­ing costs are al­ready near a record low but has "re­served some space" to act if needed, he said. Veerathai and the other six mem­bers of the bank's Mon­e­tary Pol­icy Com­mit­tee voted unan­i­mously Feb. 3 to hold the rate at 1.5 per­cent for a sixth straight meet­ing.

"Even though we say that for now we see lim­ited need for fur­ther eas­ing of mon­e­tary pol­icy, it doesn't mean we shut the door for the pos­si­bil­ity for eas­ing in mon­e­tary pol­icy if the en­vi­ron­ment doesn't turn out as we ex­pected," Veerathai, 46, said Mon­day at his of­fice in Bangkok. "If such a shock oc­curs com­ing from out­side, the MPC would like to have some space to be able to be­come more ac­com­moda­tive."

While Thai­land has ben­e­fited from the slump in oil prices be­cause it's a net im­porter of en­ergy, the na­tion's ex­ports have tum­bled for three straight years as Chi­nese de­mand cooled. Asia's big­gest econ­omy was de­throned by the U.S. as the big­gest over­seas mar­ket for Thai goods last year, but re­mains the largest source of vis­i­tors to Thai­land.

China's for­eign re­serves have fallen to their low­est since 2012 as pol­icy mak­ers com­bat a weak­en­ing yuan amid slower eco­nomic growth, plung­ing stocks and in­creas­ing out­flows. Veerathai said fur­ther mar­ket volatil­ity could po­ten­tially threaten the pace of eco­nomic re­form in China as that coun­try's econ­omy shifts to­ward ser­vices and con­sump­tion.

Thai­land is in a rel­a­tively bet­ter po­si­tion than other Asian emerg­ing mar­kets to cope with volatil­ity be­cause it has solid fun­da­men­tals, in­clud­ing a large cur­rentac­count sur­plus, said Kozo Hasegawa, a cur­rency trader at Su­mit­omo Mit­sui Bank­ing Corp. in Bangkok. The baht rose to a three-month high Tues­day, touch­ing 35.390 per dol­lar, af­ter Veerathai said Thai­land's high for­eign re­serves and low debt lev­els pro­vide "a good buf­fer" against cap­i­tal out­flows.

"We also need to be con­cerned about tail-risk events," Veerathai said, cit­ing the po­ten­tial for a pro­longed pe­riod of low oil prices and con­tin­u­ing in­sta­bil­ity in China's fi­nan­cial mar­kets. Thai pol­icy mak­ers are also wait­ing to as­sess the im­pact of govern­ment stim­u­lus spend­ing and the progress made on high-speed rail net­works and other in­fra­struc­ture, he said.

"Many projects have been long de­layed in Thai­land partly be­cause of the political dif­fi­cul­ties that we have had," Veerathai said, re­fer­ring to mil­i­tary coups in 2006 and 2014. "The other part re­lates to political in­ter­fer­ence, but this will de­pend on the abil­ity of the cur­rent govern­ment to make tough de­ci­sions and start the bid­ding process. Once th­ese projects go through the bid­ding process, there will be high de­gree of as­sur­ance that they will con­tinue to stay and get com­pleted as planned."

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