Chamber seeks aggressive cut to policy interest rate
The Thai Chamber of Commerce yesterday asked the Bank of Thailand's Monetary Policy Committee to slash its policy interest rate by a weighty 75 basis points or a full percentage point at its meeting today, in order to stimulate slumping domestic consumption and stem the continued strength of the baht.
According to the director of the Centre for International Trade Studies at the University of the Thai Chamber of Commerce, Aat Pisanwanich, the policy interest rate should be cut by about another two percentage points in total this year.He said the gap between inflation and the interest rate had become wider because the inflation rate has declined to 2.25 per cent. The Bank of Thailand should realise that the country's flagging economy has not been boosted by cuts of 50 basis points to the policy rate made at each of two previous meetings of the Monetary Policy Committee, Aat said. Therefore, it should try reducing the rate aggressively. Moreover, the stronger Chinese yuan has affected the baht's appreciation, leaving exporters to face an even tougher situation. Chinese investors, on the other hand, will be looking for more opportunities to invest in other countries, including Thailand, and demand for Thai goods in China will also rise. Aat said the percentage of gross domestic product attributable to small- and medium-sized enterprises (SMEs) this year will be slightly lower than last year's 4.1 per cent. The index for retail and wholesale business in the first quarter fell by 4.88 per cent, quarter on quarter, due to fierce pricing competition among department stores. The university believes this index will tumble by a further 4.75 per cent in this quarter because of the economic slow-down and fluctuation of the baht. The services sector index is also expected to fall by around 4.55 per cent in this quarter as a result of lower investment and consumer confidence. This drop is expected to affect logistics, communications and property businesses in particular. However, the manufacturing production index for this sector is expected to be 0.53 per cent higher than in the first three months, thanks to rising demand for rubber products and plastics. Aat said most SME operators were presently unable to find markets and it was difficult for them to approach financial institutes and banks for support. However, the percentage of gross domestic product coming from SMEs is expected to increase in the second half of the year because of government spending and the possibility of cuts in interest rates. Chalida Ekvitthayavechnukul The Nation
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