Thailand is considering three of five options to stem the baht appreciation as proposed by the Bank of Thailand, Finance Minister Korn Chatikavanij said yesterday. The measures are generally designed to spur outflows.
"There is no problem in principle, but what is to be considered is the appropriate timing and side effects. These measures should tame the baht appreciation," Korn said. He asserted that the baht was likely to continue appreciating due to the weakening of the US dollar against major currencies due to the fragile US economy.
The three measures are:
n The overseas property investment limit for Thai individuals and juristic persons could be raised from $10 million.
n They may also be allowed to increase foreign currency deposits from $100,000 to $500,000.
n Exporters could also be allowed to maintain foreign currency income in overseas accounts up to $50,000, from $20,000.
Korn as asked by Pheu Thai MP Prakiat Nasimma what measures the ministry was considering to ease the negative impacts on exporters, manufacturers and the tourism sector from the baht appreciation. The minister admitted that there were negative impacts, but on the positive side, the stronger baht increased Thailand's purchasing power.
He noted that the strong baht was in the government's focus as it affected the export sector, a major growth engine. The market is being closely watched to evaluate the actual cause of the baht appreciation as well as to prevent speculation. A factor boosting the baht is the widening current-account surplus, he said. He believed that the Bank of Thailand has bought some dollars to weaken the baht, but the result will not be immediate.
In Parliament, Korn highlighted that regional currencies remain strong because the Chinese yuan is not allowed to move in line with fundamentals. To help exporters, the Export-Import Bank of Thailand and the Small and Medium Enterprise Development Bank are assigned to help SME exporters.
Bank of Thailand Governor Tarisa Watanagase reiterated yesterday that the dollar/baht rate was in line with economic fundamentals and that the central bank was not shifting its stance on foreign exchange and interest rate policies.
"If the economy remains robust and the political situation remains peaceful, the interest rate policy may not be changed this year," she said.
The Monetary Policy Committee raised the policy rate twice this year. It is expected to make another increase later this year to tame inflationary pressure, amid fear that higher rates would attract more inflows.
The Thai baht yesterday strengthened from 30.89 per dollar to 30.74. The currency on September 15 touched 30.71, the strongest level since August 1997.