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Prasarn warns of cancerous impact on economy if conflict persists

THE CENTRAL BANK has warned that if the country's protracted political problem lasts much longer, it could undermine the Thai economy and that, although the situation would be recoverable, any recovery would not as be solid as in the past. Like a patient with a high sugar level in their blood, the country has a high chance of being affected with serious disease by way of complications.

Although the current political situation has not led to a sudden economic shock, as happened in 1997, if the political situation continues, malignant cells could develop like a cancer in the Thai economy, whose fundamentals are not as strong as in the past, Prasarn Trairatvorakul, governor of the Bank of Thailand, said in an interview with Nation Multimedia Group chairman Suthichai Yoon.

In response to a question about how long the economy could be resilient to the political problem, he said it depended on several factors. Take a person with a serious disease: with a peaceful mind and regular physical checks, their body may recover fast.The Thai economy may not confront a sudden shock, when one looks back at the private sector's situation during the time of the Asian economic crisis in 1997. The private sector's debt-to-equity ratio presently averages 1 time, whereas back in 1997, it stood at 8-9 times. Moreover, commercial banks are presently cautious about their business operations and have strong loan-loss provisions, Prasarn said.

The Bank of Thailand has forecast that the economy will grow 2.7 per cent this year, based on a new government being formed in the latter half and a delay in the fiscal 2015 budget implementation being no longer than one quarter. The economic growth rate is now considered to be at a lower level than its real potential, despite the previous expectation of 5-per-cent expansion this year, said the central bank chief. "This is a pity, particularly during a period in which the country was passing from being a middle-level income country to a high-level income country.

The exclusive interview on Thailand's economic pulse will be run on The Nation TV channel in the "Timeline Suthichai Yoon" programme at 7pm on Sunday.


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