Outflows driven by US policy no concern: BOT governor
February 21, 2014 00:00 By The Nation
IIF conference hears 3% Thai GDP growth expected in H2 on balanced economy
Attending an international conference, the governor of the Bank of Thailand said he was not concerned about capital outflows after the US Federal Reserve reduced its monetary stimulus, while he expected Thailand’s gross domestic product to post 3-per-cent growth in the latter half of this year.
The United States is tapering off its quantitative easing programme. “That is not a very big deal for Thailand, as our economy is balanced,” Prasarn Trairatvorakul told reporters outside a meeting of the Institute of International Finance (IIF) in Sydney, Australia, yesterday.
Prasarn expressed more concern over slowdowns of domestic consumption and investment, given the Kingdom’s political unrest. Consumption and investment will take some time to recover. He said he expected the Thai economy to expand by about 3 per cent in the second half of 2014.
The central bank may cut the policy interest rate. It kept the rate unchanged last month’s meeting of its Monetary Policy Committee, which came as a surprise to many economists, who expected a rate cut driven by the protests that have paralysed parts of Bangkok.
GDP expanded 2.9 per cent for the whole of 2013, with a sharp economic slowdown in the last quarter.
Prasarn said the aim was to balance financial stability and long-term economic expansion. For now, the US monetary stimulus is not an issue for Thailand.
After the QE tapering began, developing-country stocks, bonds and currencies have swung in recent months. The currencies of Turkey, South Africa and Russia slumped after US dollar capital moved out of these countries.
Asian currencies did not see much impact from the recent volatility. So far this year, the baht has strengthened 0.7 per cent against the dollar. New US Federal Reserve chairwoman Janet Yellen will attend a Group of 20 meeting in Sydney this weekend. Emerging countries are expected to push for leading central banks to collaborate more on policy.
The G-20, which accounts for 90 per cent of the global economy, consists of the United States, the United Kingdom, France, Germany, Japan, Canada, Italy, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union.
Prasarn also voiced his support for international regulatory consistency in light of the higher interconnection among global financial markets.
At an IIF event titled “The G-20 Agenda under the Australian Presidency Conference”, he said in a special address: “I wholeheartedly support the Basel Committee’s Regulatory Consistency Assessment Programme, which includes the peer-review process to assess the consistency and completeness of the adopted standards among members, and the work on consistency of risk-weighted assets [RWAs] across banks.
“I have heard that these works have been quite constructive in that the peer-review process has encouraged more timely and comprehensive adoptions, and the work on RWA consistency would lead to refinements of model-based frameworks.
“I believe that promoting greater international regulatory consistency is beneficial in many aspects. The current regulatory reform is comprehensive in design.
“Consistency of implementation, along with supervision, is the utmost important aspect in order to achieve prudential objectives as intended. Regulatory consistency helps ensure system-wide stability, improve efficiency of capital allocation, as well as support cross-border trades. In addition, it provides level playing fields, thus reducing regulatory arbitrage among financial service providers.
“It also enables comparability, thus enhancing market mechanism to benefit financial-service customers and investors,” he said. He noted that regulatory consistency did not mean uniformity, where one rule fitting one market can fit others. He also praised the Basel Committee’s effort to achieve overall consistency with some flexibility to suit local contexts.
“Countries and markets across the globe are at widely different stages of development, and also at different stages of business and financial cycles. Therefore, these are very good reasons why we should not have a single rulebook applying the same way regardless of national circumstances,” the BOT governor said.
He said the road to achieve this could be bumpy and as such, it required commitment from all global leaders.
The IIF is a global association of financial institutions.