Treasury Outlook

There was an attempt by China and Russia to raise the issue of an alternative world reserve currency but many other countries did not enthusiastically take to the idea.

The world is now facing a very severe economic crisis, according to former US Fed chairman Paul Volker, who recently observed that the world economy might not deteriorate at the same rate experienced in late 2008, but that any recovery would take a very long time.

On the domestic front, the Monetary Policy Committee decided to cut the Kingdom's key policy rate, the oneday repurchase rate, by a further 25 basis points to 1.25 per cent.

The move is another attempt by the committee and the Bank of Thailand to revive the economy.

Following the resolution, there were remarks by officials that commercial banks should also consider cutting their minimum lending rates (MLR) at the same pace as deposit rates. Banks also need to start lending to help stimulate the economy.

In my opinion, economic conditions have forced banks to be very cautious, and secondly the MLR is not applicable to good corporations.

Banks always give very favourable rates and services to good corporate customers.

Therefore, the real net interest margin is much lower than simply the difference between the MLR and threemonth deposit rate.

Exports and tourism are the main drivers of the economy. In the current situation, there is little or no hope that exports and tourist arrivals will quickly return to normal levels.

Low interest rates alone will not fix these problems. We believe that more government spending is required and many policymakers are well aware of this issue.

The other pressing issue is to restore social and political stability as quickly as possible.

Without stability, any economic stimulus package that the government introduces will not be effective.

Clearly, if all parties settle their differences peacefully and democratically, then economic recovery will be that much quicker.