Logo of Phnom Penh Post newspaper Phnom Penh Post - Central bank head: Thailand’s economy can survive shocks, but political unrest worrisome

Central bank head: Thailand’s economy can survive shocks, but political unrest worrisome

Content image - Phnom Penh Post
Bank of Thailand governor Sethaput Suthiwartnarueput says the economy is resilient enough to survive the shock unleashed by the ongoing political unrest. THE NATION

Central bank head: Thailand’s economy can survive shocks, but political unrest worrisome

Thailand's newly-minted central bank governor Sethaput Suthiwartnarueput said he is concerned about the ongoing political unrest, but added that the economy is resilient enough to survive any shock.

The Bank of Thailand (BoT) has forecast that the economy will contract 7.8 per cent this year and will only start expanding in the second quarter of next year.

“It [the political unrest] will affect consumption, investment and confidence,” Sethaput said at his first press meeting on Tuesday.

“And problems with actual execution of policies will make things tougher,” he said referring to the government’s usual difficulty with policy execution rather than planning.

Anti-government protesters have intensified their rallies across the country demanding that the government step down, while the government has responded with crackdowns on protest leaders and censorship of the press.

Businesses, meanwhile, are worried that the state of emergency imposed by the government will have an adverse impact on the economy.

Thailand’s economy has already been crippled by the Covid-19 outbreak and taking far too long to recover.

“The state of the economy now can be compared to a patient who is slowly coming out of intensive care,” he said.

The outbreak resulted in a sharp drop of tourists from about 40 million to 6.7 million, which translated to an income loss of 10 per cent of the gross domestic product. Thai exports in the second quarter shrank to the lowest level in 11 years, like a gravely ill person who needs intensive care, he continued.

Recovery, he said, is uneven among different sectors and the economy will take at least two years before it returns to pre-Covid levels, especially since it is still uncertain when a vaccine will be available and how much the tourism sector will recover.

In a bid to adapt to the changing environment, the BoT has recently shifted its policy from providing blanket financial aid to a more targeted, comprehensive and flexible scheme, he said.

However, he said, there are no new measures planned.

He also voiced confidence that the Thai economy is resilient to shocks brought on by the virus or other factors.

“The public debt is manageable, the country is financially stable and the labour market is flexible,” he said.

As for the strengthening of the baht, he said this was due to the high current account surplus, which comes in at $30 billion annually.

He said Thailand is not able to recycle this money for investment overseas because few Thai listed companies are investing abroad. This is unlike South Korea and Taiwan, which have been successfully recycling their large current account surplus by investing overseas.

Over the past five years, the BoT has learned that external factors such as the US dollar and regional currencies account for 85 per cent of the impact on the baht exchange rate, while domestic factors represent only 15 per cent.

Hence, the central bank is not able to have much of an influence on the currency’s exchange rate.

Thai exporters have long complained that a stronger baht is eroding their competitiveness, and have recently suggested that the currency be brought down to 34 baht against the dollar from the current rate of 31.

When asked how the central bank will help boost economic growth, he admitted that the fiscal policy was the key driver with the monetary policy playing a supporting role.

Thailand is among few countries in Asia to have brought its policy rate down to 0.5 per cent, which is so low that it leaves limited room to bring it down further.

Sethaput said as central bank governor, he faces five key challenges, with the most important one being solving the debt crisis so households and businesses can survive and recover from the Covid-induced crisis.

The second is to maintain financial stability to support recovery, third is ensuring a stable macroeconomic level, so it is resilient to the impact of coronavirus and the fourth is to enhance public confidence. He said the fifth challenge is to ensure BoT works as a unified entity because it is fragmented and has so many small departments that its potential is restrained.

He said he will take a performance-based approach, allowing everyone to work together and deliver a good outcome.

THE NATION (THAILAND)/ASIA NEWS NETWORK

MOST VIEWED

  • Seven positive for Covid-19, Hun Sen confirms local transmission

    Prime Minister Hun Sen announced that there has been local community transmission of Covid-19. However, he urged the people not to panic even though the Ministry of Health announced the discovery of seven new cases on Sunday. Among the victims are Chhem Savuth, the director-general

  • Cambodia at ‘most critical moment’, Hun Sen warns

    Prime Minister Hun Sen said the first community transmission of Covid-19 in Cambodia has led the country to the “most critical moment” that warranted urgent, large-scale operations to contain the pandemic. Hun Sen, who confirmed the first local transmission on November 28, said the source of

  • PM confirms community transmission, calls for unity

    Prime Minister Hun Sen has called on the public to stay calm, unite and follow the Ministry of Health guidelines after the wife of a senior official tested positive for Covid-19 in the Kingdom’s first case of community transmission. The case has drawn criticism

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • PM vows to protect Hun family

    Prime Minister Hun Sen has vowed to continue his fight against opposition politicians who he said intend to smash the Hun family. Without naming the politicians but apparently referring to former leaders of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP), Hun Sen said there