Monetary policy could help alleviate economic woes

Although the government plans to spend Bt100 billion to boost the economy, it doesn't seem to be able to utilise the fund any time soon. The fund has not been approved and the government's future is uncertain.

Thus, all eyes are turning to the MPC's decision as to whether it will provide any monetary solution to help the economy, which is in bad shape due to the international financial crisis and the political deadlock at home. The closure of the country's two main airports has further sunk the prospects of the Thai economy growing beyond 3 per cent next year.

The Bank of Thailand should have room to use the monetary policy to help the business sector. For instance, the inflation rate is set to ease further. Thailand's inflation fell to 2.2 per cent in November from 3.9 per cent in October, according to a Commerce Ministry statement yesterday.

The recent escalation of the domestic political crisis has worsened the economic outlook. The tourism industry, which contributes 6 per cent of GDP, has been hard hit by the closure of Suvarnabhumi Airport. A number of businesses involved in international trade have been affected by stranded cargo. Commodity prices have fallen and consumer confidence has sunk to a low level. Economic indicators in October pointed to a significant slowdown in the fourth quarter of this year.

Therefore, while the government is facing fiscal constraints, the monetary tool has emerged to become an option. The lower interest rate may not help sufficiently cure the economy but it should provide industries with lower costs for fund to sustain their business during this difficult time.