PRIME MINISTER Yingluck Shinawatra yesterday instructed economic ministries and agencies to closely monitor the US government shutdown, the US quantitative easing and the European economic situation for possible detrimental impacts on Thailand's currency
The US shutdown topped the agenda of the economic cabinet meeting. Also attending were the Bank of Thailand, the National Economic and Social Development Board and the Board of Investment.
Government Spokesman Teerat Ratanasevi said Yingluck was concerned about the rapid changes in external factors and their consequences on the economy, particularly on small- and medium-sized enterprises. The NESDB and the Finance Ministry were assigned to form a working group to oversee small and medium enterprises.
Deputy Prime Minister Kittiratt Na-Ranong said after the meeting that exports and foreign exchange rates were crucial issues, as the fourth quarter is normally the high season for Thailand’s exports. The country aims to achieve 4-per-cent growth in shipments this year, after managing only 1-per-cent growth in the first eight months.
“External factors and the domestic floods are under our observation,” he said.
Most economists see limited direct impact from the US shutdown, which has cut off funding for non-essential federal tasks since Tuesday. The centre of attention now is the US administration’s negotiations with the Republicans for an increase in the US$16.7 trillion debt ceiling. Without approval by the middle of this month, the US would default on its debts for the first time in its history.
Under these circumstances, the US Federal Reserve is widely expected to maintain its bond-buying programme at the current rate of $85 billion a month to boost the economy. This will further propel liquidity into emerging markets, and may boost the Thai stock market as well as the dollar/baht exchange rate as in the first four months of this year.
‘No irregular movement’
Mathee Supapongse, a senior director of the Bank of Thailand, said the central bank would take a few more days to assess the impacts of the US shutdown on the local economy. No irregular movement of capital has been detected yet, he said.
Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office, told a seminar that there is not much concern about the shutdown of US government offices.
“If the shutdown goes on for a month, it should shave just 0.1 percentage point off their GDP [gross domestic product]. It’s minimal. And Thailand could see a very minimal impact. If there are any impacts, this should be seen through volatility in global capital markets.”
The US will definitely raise |the debt limit, he said, and it is worth monitoring how the global markets will react to that. Rating agencies may once again lower the US sovereign rating, and this will again rattle global markets.
Thailand should be able to cope with market volatility, given the country’s economic stability, and its foreign reserves remain much higher than short-term debts, he added.
Yesterday, the Stock Exchange of Thailand Index edged up 0.80 point or 0.06 per cent to 1,408.99, after a 1.81-per-cent gain the previous day. The baht stabilised at 31.29 per dollar yesterday. It lost only 0.5 per cent from the previous closing, chiefly because of the likelihood that the Bank of Thailand would cut the GDP growth forecast from 4.2 per cent.
The Asian Development Bank yesterday cut its forecasts for Thailand and many countries in Asia-Pacific.
Pakorn Peetathawatchai, head of market operations at the SET, said money will flow out of the US in case of default, so stock investors must closely monitor the global situation.