Baht's value 'reflects fundamentals'
The Bank of Thailand insists the value of the baht is in line with the country's economic fundamentals, which means there is no need for intervention to protect the interests of exporters.
At the same time, the central bank accepts that political uncertainty is still the main weak point when it comes to foreign direct investment.
BOT Governor Prasarn Trairat-vorakul yesterday said exporters were not at a relative disadvantage to those in other countries due to the strength of the baht against the US dollar.
The unit is now considered to be at an appropriate level, as it has been allowed to move in accordance with the fundamentals of the economy, he said.
“When saying the baht is strengthening against the US dollar, this reflects our strong fundamentals compared with the US. Since the financial crisis of 1997, we have had current-account surpluses every year, while the US has had current-account deficits,” he added.
Prasarn also said the central bank would not adopt a fixed exchange-rate policy, as some have proposed, as it would mean having a fixed target while capital flows are unpredictable.
Suchada Kirakul, BOT deputy governor for monetary stability, said the economy was relatively strong in terms of product distribution, which provides resilience when the economy is hit by other factors.
In addition, investment sentiment is now higher among foreign investors, she said, adding, “Political uncertainty is, however, still the weak point.”
Paiboon Kittisrikangwan, BOT assistant director for the monetary policy group, said the economy’s strong point was the private sector, which had shown it could recover rapidly after the floods. Moreover, the government’s monetary and fiscal policy is functioning well, as reflected by a relatively low ratio of public debt to gross domestic product.
However, he said the country was still over-reliant on original-equipment manufacturing for other countries. It should develop further, especially in regard to value-added creation, in order to become a sustainable manufacturer that relies on research and development.
About 0.2 per cent of GDP is spent on research and development, which he said was much lower than in South Korea and Japan. “If the country wishes to see economic growth at 7 per cent annually, it needs to invest in productivity development,” he added.
Meanwhile, the central bank has reserved banknotes worth Bt480 billion to cope with expected withdrawals during the long Songkran holiday period.
