MPC narrowly votes to keep 3% policy rate

The central bank’s Monetary Policy Committee (MPC) yesterday was split on the issue, as only three members voted to keep the rate at 3 per cent per annum while two wanted to cut it to 2.75 per cent. The remaining two members were absent from the meeting.
Markets were closely watching whether the central bank would cut a one-day repurchase rate to below 3 per cent on adverse effect of the slow recovery of the United States and persisting crisis in the Europe.
Paiboon Kittisrikangwan, assistant governor of the BOT, said robust domestic demand was the main reason for holding rate at 3 per cent.
Paiboon, who is also secretary of MPC, said the panel saw that overall risks to the global economy remained elevated.

FASTER THAN PROJECTED
The Thai economy in the second quarter grew at a faster rate than previously projected. Strong momentum in consumption and investment is likely to sustain a positive trend in domestic demand, the committee believed.
Key supporting factors included strong private-sector confidence, favourable labour-market conditions, higher household income, and accommodative monetary conditions, with private credit growth in particular remaining strong.
Retail loans comprising housing, automobiles, personal loans and credit card grew sharply by 31 per cent year on year in August.
According to the central bank, credit to the household sector grew 17.2 per cent year on year and to the business sector by 15.5 per cent in July.
The MPC took the view that the impact of slower global demand on the Thai economy had increased to some extent. Nonetheless, domestic demand remained robust and current monetary conditions were accommodative enough to support continued economic expansion. Credit growth in some sectors has been rapid and warrants close monitoring, Paiboon said.
Kosit Panpiumras, executive chairman of Bangkok Bank, said the country’s economic growth should not be driven by debt, as many countries face economic crises because of huge debt accumulations. He suggested the government should uphold fiscal discipline and collect more tax revenue.

RETAIL LENDING
Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said retail lending in the first eight months was driven by auto loans rather than housing or personal loans.
He said the prospects for overall loan growth were good, expected to be 11-12 per cent based on growth in gross domestic product of 5.5 per cent.
In a separate matter, a meeting of economic ministries yesterday agreed that Thailand should boost the export of heavy-industry and automotive products to Europe to meet the country’s export-growth target, Commerce Ministry permanent secretary Yanyong Phuangrach said yesterday.
The meeting was in response to the shrinkage of export to Europe due to the euro-zone crisis. Textiles and agricultural products suffered most, while heavy-industry and automotive products have continued to perform well. Therefore, it was decided that Thailand should boost exports of these two categories.
The meeting also acknowledged the Commerce Ministry’s new export-growth target of 7-9 per cent this year, down from the previous target of 15 per cent. If the country wants to achieve the 7-per-cent growth target, it must reach export value of at least US$21.270 million (Bt664 million) per month for the remaining five months and $22.161 million per month if it wants to hit 9-per-cent growth.