slowdown top priority

A high-powered committee tasked with monitoring the potential fallout from the US financial crisis yesterday urged the government to use both fiscal and monetary measures to prevent serious damage to the economy.

The panel said disbursements of the state budget would have to be accelerated to maintain growth momentum, while monetary policy would have to be eased - with interest rates being kept unchanged or lowered.

Meanwhile, the Securities and Exchange Commission (SEC) yesterday made it easier and quicker for companies to issue bonds and warrants domestically following the onset of the global credit crunch.

While Thailand has not been directly hit by the American financial crisis due to its relatively small exposure to sub-prime assets, the country will likely be damaged by a global economic slowdown which will weaken exports, tourism and capital flows.

Suparat Kawatkul, permanent secretary at the Finance Ministry, said the committee now believed that an economic slowdown was the key issue, not inflationary pressure as was previously the case.

Atchana Waiquamdee, the Bank of Thailand's deputy governor, agreed that monetary and foreign-exchange policies must address the prevailing problem, as the risk of inflation has declined and the risk to economic growth has become greater.

The SEC said bonds offered to institutional investors could now be issued within a day of an official filing, instead of seven days, while warrants issued to existing shareholders could also be issued more quickly.

The bond-issuance fee for listed companies has also been slashed, from Bt2 million to Bt50,000 per batch.

"These measures will ensure that Thai companies, particularly listed ones, will not suffer from delays in raising much-needed cash," said SEC secretary-general Thirachai Phuvanatnaranubala.

On interest rates, Atchana would not speculate on whether the Monetary Policy Committee will cut the policy rate at its meeting next week, but said the risk to growth would be a major factor in reaching its decision.

On foreign exchange, she said the baht's movement would have to be in line with other regional currencies.

The Kingdom's international trade could be hit by a slowdown in the three major economies - the US, Japan and the European Union - badly affected by the US financial meltdown. Moreover, lower capital inflows could hurt Thailand's foreign direct investment, portfolio investment and loans, she added.

At present, there is sufficient domestic liquidity, as commercial banks lodge funds of around Bt300 billion to Bt400 billion at the central bank on a daily basis. Somchai Sujapongse, the director-general of the Financial Ministry's Fiscal Policy Office, said specialised financial institutions would help the private sector to avoid any liquidity problems.

As to domestic financial institutions and investment funds, the country is in a strong position, as the combined exposure to bad assets in the US is a meagre 0.26 per cent of total assets, said Somchai.

Chantra Purnariksha, secretary-general of the Office of the Insurance Commission, said policyholders would soon have their investments guaranteed via an agency that is in the process of being set up.

Pongpanu Svetrarunda, director-general of the Public Debt Management Office, said the ministry would still give the green light for foreign financial institutions or firms with an AAA credit rating to issue baht-denominated bonds.