Kittiratt rules out capital control measures on baht

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong yesterday insisted the government would not introduce capital-control measures despite the continued influx of foreign capital, which has caused the baht's recent appreciation.

After a discussion between Prime Minister Yingluck Shinawatra and her economic team, Kittiratt said the government had the necessary tools without the need for new tax measures that could affect returns on investment.

While Thailand has seen a large amount of capital flowing into the stock and bond markets, such capital inflows could be short term due to high market liquidity, according |to the Bank of Thailand.

"I insist that the government will not use control measures for capital movement, as we are an open country. The mechanism has to be normal," Kittiratt said.

The government is proceeding with its usual strategy of medium- and long-term measures, including the promotion of Thai businesses' investments overseas. This could lessen pressure from the strengthening baht, according to the National Economic and Social Development Board.

However, as the long-term measures would not have an effect on current short-term capital movements, yesterday's meeting agreed that there should be a discussion on the need for monetary measures related to short-term capital inflows, which it acknowledged did contain risks.

"It has to be [a matter for] monetary policy management. I have been assigned to discuss this soon with the Bank of Thailand governor, the Monetary Policy Committee and others related to the issue. I insisted that the eligibility and duty for monetary decision-making belonged to the BOT and the MPC," said the deputy PM.

Baht volatility is a concern as it has affected the business sector, he said, adding that stability is needed.

Small- and medium-sized exporters are facing more difficulties as a result of the unit's appreciation, he said. The premier and the economic team yesterday also discussed the state of the global economy and the impact of the minimum-wage hike on the economy and the business sector.

The Fiscal Policy Office expects the Thai economy to register 5-per-cent growth this year, on the assumption that exports will expand by 10 per cent. The baht's recent rise has yet to affect economic growth, given that it has moved within the office's estimated range.

The agency estimated an average baht value this year of 30.70 per US dollar, moving within a range of 29.70 to 31.70. It also estimated that last year's economic growth came in at 5.7 per cent.