Ex-finance minister Suchart urges BOT to cut policy rate
Former finance minister Suchart Thadadamrongvej yesterday added to the pressure mounting on the Bank of Thailand (BOT) to take steps to stem the appreciation of the baht, urging the central bank to trim its policy rate to stave off the torrent of capital flowing into the Kingdom's capital and asset markets.
Suchart is concerned that the baht's rise has affected the export sector, which would eventually affect the government's revenue. If the central bank continues to maintain its high policy rate, it will continue to attract huge inflows and boost inflation, the former minister said, adding that the BOT should set the policy rate lower than those in the global markets.
His remarks yesterday followed a spate of comments on the baht in recent weeks, including those by Ammar Siamwalla, professor emeritus of the Thailand Development Research Institute, who favours capital controls to stem the inflows, believing lower interest rates alone may not be enough to cut the inflows and prevent asset bubbles.
Over the past week, echoing BOT chairman Virabongsa Ramangkura, Finance Minister Kittiratt Na-Ranong said he favoured a policy-rate cut to match historically low interest rates in the United States and Japan, but left it to the central bank to make the decision.
The National Food Institute yesterday expressed concern over the impact of the baht's appreciation on the food-export sector, which is expected to lose some of its competitive edge to overseas competitors this year.
The Bt300 daily minimum wage hike has also added to the sector's production costs, and some operators have not bee able to adjust, Industry Ministry permanent secretary Vitoon Simachokdee said after a meeting with the institute yesterday.
The institute projects the value of food exports this year to reach Bt1.05 trillion, up 7.2 per cent year on year, due to the improving global economy, which is expected to grow 3.5 per cent this year, versus 3.3 per cent last year.
Commerce Minister Boonsong Teriyapirom said that based on a preliminary discussion with the Thai Chamber of Commerce and the Federation of Thailand Industries on the impact of the rising baht, he believed many exporters could continue to do business as usual, as they have adopted currency hedging by using forward contracts. However, the smaller operators might feel the pinch from the strengthening baht, he said.
"We maintain an export growth target of between 8 per cent and 9 per cent this year. But we did not factor in the baht rise when setting the target. We have asked related state agencies to collect information on factors that could impact exports and will see if we need to review the growth target," Boonsong said.
The ministry, FTI and Chamber of Commerce will have formal discussions on the impact of the strengthening currency next week, and the results will be forwarded to the government to work out measures to help exporters in each industrial segment.
The Stock Exchange of Thailand composite index yesterday gained 25 points to end the day at 1,499.22. The index, rising 1.7 per cent from the previous closing, was boosted largely by foreign capital inflows. Turnover was Bt58.5 billion. Foreigners' net-buys in January reached Bt15 billion.
Asian bourses were mostly up yesterday. Tokyo was up 0.47 per cent, or 52.68 points, at 11,191.34 and Sydney climbed 0.87 per cent, or 42.3 points, to 4,921.0, but Seoul eased 0.21 per cent, or 4.15 points, to 1,957.79. Shanghai surged 1.41 per cent, or 33.60 points, to 2,419.02, while Hong Kong was flat, dipping 7.69 points to 22,721.84.