BOT ready to slash policy rate
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Bank of Thailand Governor Prasarn Trairatvorakul signalled a policy rate cut, in the event the the global economy performs worse than expected and sends negative impacts to the Thai economy.
At "Thailand Focus 2012: Positioning Thailand for the Next Growth Phase", the governor said that the central bank is ready to adjust the policy rate in line with global economic situation. The policy rate could head up or down, but the central bank will ensure that it is at an appropriate level, he added.
Referring to the zero rate in the US which is low but fails to boost the economy, he said Thailand's policy rate at 3 per cent still can accommodate economic growth.
"The policy rate could be cut on a hiccup on the global economy. The global economy is slowing down now, not yet experiencing a hiccup (recession for two consecutive quarters). The global economy is still expanding 2-3 per cent," he said.
Prasarn said that Thailand's economy shows resilience to the euro-zone crisis, despite negative impacts on the export sector which could intensify next year. He admitted that Thailand is not immune to euro-zone crisis. Yet, he is convinced that the economic fundamentals are strong enough to withstand negative impacts.
Thailand experienced capital outflows in the first half of this year, but inflows have resumed since July, he added.
The central bank recently revised down the 2012 economic growth forecast from 6 per cent to 5.7 per cent, buoyed mainly by domestic consumption and investment. HSBC forecast 0.6 per cent contraction in the euro-zone economy this year. Global houses including the International Monetary Fund expect the public debt fiasco to further drag the zone in 2013.
Thailand's exports have experienced declines for the first time in years. Though Europe consumes only 10 per cent of total exports, demand from other countries chiefly China (consuming 15 per cent of export now) has weakened due to the crisis in the euro zone.
The Commerce Ministry today unveiled the preliminary trade data in July, which showed the continued decline in exports.
In the month, export value declined 4.46 per cent from the same period last year, to US$19.54 billion. Import advanced 13.73 per cent to $21.29 billion, resulting in trade deficit of $1.74 billion
In the first seven months, export dropped 0.4 per cent to $131.8 billion. As imports rose 10.5 per cent to $143.89 billion, Thailand saw trade deficit of $12.08 billion.
The Bank of Thailand forecast 7 per cent export growth for this year. "It would be an uphill task to achieve the target," Prasart said today. To achieve that, monthly export figure in the remaining months of the year must be at least $22 billion.
Should the monthly export value be lower than $20 billion, the annualised export growth would be only 4 per cent, he warned.
