'No recovery until 2007'
The economy is expected to begin to recover early next year rather than in the middle of this year as previously expected, due mainly to the persistence of high oil prices and adjustment to a weaker baht, said Phatra Securities.
The securities firm said these factors could add upward pressure to interest rates and reduce the likelihood of monetary policy easing by the end of the year. Also, a new government will not be in place until the end of the third quarter. "Accordingly, tangible economic recovery is expected to be delayed well into 2007," Phatra Securities stated. The company said the Bank of Thailand had surprisingly intervened in the baht between April 21 and May 5, when the unit appreciated 0.7 per cent against the US dollar. This was below the yen and other key currencies, which strengthened 2.5-3 per cent against the greenback during the same period. However, intervention to weaken the baht in the midst of rising inflation would risk adding to inflationary pressure, the securities firm said. "The most likely reason in our view is that the BOT would like to buy time for exporters to adjust to a stronger baht. Therefore, an appreciation of 3-4 per cent would need four to six months to adjust to, for example," Phatra said. The Nation
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