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Published on January 10, 2008

Tarisa yesterday said a recent meeting had discussed whether developing countries would be able to make themselves independent from the US economy. The meeting concluded, however, that they would not be much affected if the US economy did not go into recession.

The central-bank governor said developing countries had so far continuously diversified export markets into different regions instead of largely relying on the US market. Moreover, banking systems in developing countries have been strong, because international reserves remain high.

Thai exporters have clearly shifted into other export markets, while exports to the US market have grown slowly. But the Kingdom must constantly improve its efficiency, Tarisa said.

The Commerce Ministry said Thai exports to the US represented only 14 per cent of total exports, down from 25 per cent a decade ago.

"If the US economy falls lower than expected, developing countries will not completely avoid the impact," Tarisa said.

Some analysts predict the US economy will fall into recession, but the BIS has taken a different view. It has an optimistic opinion that employment rates remain good and will improve in the second half of the year.

However, the international bank also questioned whether the impact of the sub-prime fiasco would fall on not only the financial sector, but also the real sector: production and consumption.

Markets also have mixed views on the trend of the US dollar, with some believing in the continuing strength of the dollar and predicting it will turn around after a deep depreciation, because a large amount of capital will flow in to buy cheap assets in the US. Recapitalisation in the banking system has also brought about a stronger dollar.

"No one can make any strong conclusions about which direction the dollar will move, because everything changes rapidly," Tarisa said. "The dollar's movement depends on whether the sub-prime crisis will affect production and spending beyond expectations."

Tarisa said a turnaround of the dollar would lead to a weaker baht, which would benefit exports.

BOT assistant governor Suchada Kirakul said the baht had so far appreciated about 1 per cent, slightly weaker than other regional currencies. Imports for re-export will be able to reduce the pressure on the baht, although investments have not yet picked up.

 Anoma Srisukkasem

 The Nation