THE Bank of Thailand yesterday said that while it understood the concerns of the private sector regarding the export situation, it would not come up with any mitigating measures at this time as the causes of the problem had originated externally - and it
The Joint Standing Committee on Commerce, Industry and Banking earlier expressed the private sector’s worry about the country’s export competitiveness in terms of the exchange rate, since the baht seemed to be stronger than other trade competitors in the region when compared with the US dollar.
Thai Chamber of Commerce (TCC) chairman Isara Vongkusolkit, who was among those who met with the BOT yesterday, said the Malaysian ringgit had depreciated by 8 per cent when compared with the baht since the price of oil started falling last year.
Meanwhile, exports of merchandise to major trading partners, especially Europe and Japan, had generated less income because of the weakening of the euro and the yen as a result of quantitative easing by the European Central Bank and the Bank of Japan, he said.
Thai exports to the euro zone and Japan accounted for 9.2 and 9.6 per cent respectively of the Kingdom’s export value of US$227.57 billion (Bt7.43 trillion) last year.
Since the end of 2014, the baht strengthened against the US dollar by 0.9 per cent as of February 10 while the Philippine peso and Vietnamese dong strengthened by 0.9 and 0.3 per cent respectively. The Indonesian rupiah, Malaysian ringgit and Singapore dollar depreciated by 1.8, 2.3 and 2.3 per cent respectively over the same period, the BOT said.
“Each country has its own economic problems, but they also use their own internal measures, especially a country whose currency has depreciated but its inflation rate is still high, so the meeting today was for the Bank of Thailand to understand our side of the situation and to help us analyse what is going on at the moment,” Isara said.
Thailand’s year-on-year headline inflation in January came in at minus-0.41 per cent, which was below the central bank’s annual target range of 1-4 per cent.
However, the BOT earlier explained that falling oil prices had caused low inflation and that there was no problem with the demand side.
The TCC also confirmed that domestic consumption was still recovering, as seen in increased revenue from the collection of value-added tax last month.
Pongpen Ruengvirayudh, BOT deputy governor for monetary stability, said the central bank had explained to the TCC that the current differences in the direction of exchange rates were caused by differences in countries’ financial situations and the monetary-policy stance they had each adopted.
She said she believed that the two organisations were now on the same page in this regard.
“We have explained that our tools have limitations in terms of their effectiveness in the medium term … and we have recommended that the private sector try to adapt and also help themselves, since this situation [slowdown in global demand and lower competitiveness of some products] is expected to continue in the next period. The TCC understands this point, while agreeing to convey this message to its members,” she said.
“The changes [in monetary policy and exchange rates] happened on the global and regional scale, and Thailand alone cannot manage the situation to be as we would want it to be. That is something that is difficult to see,” she added.
Meanwhile, the TCC recommended that the BOT increase its efforts to promote the use of local currency in regional trades, while the bank responded that although |it shared the same goal as the |private sector – since the move |would lower foreign-exchange risk – such a change took time.
Pongpen said the central bank was doing everything possible to speed up the currency-liberalisation process, and progress towards the use of local currency was ongoing, but since there were always two sides in a trade, trading partners had to also agree with the use of local currency over the main currency before such a move could gain more popularity.
The TCC also recommended that Thailand should find new market channels by trading with countries that are currently subject to economic sanctions by developed economies, such as Afghanistan, and that the central bank should facilitate such a move by encouraging Thai banks to open financial services with such countries.
However, the BOT put the brakes on the idea, explaining that a decision on the issue did not rest with the central bank, as it would be a matter of national interest.