QE3 has little effect on baht so far: BOT
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So far the baht has been affected little by the US Federal Reserve's recent quantitative easing (QE), but the Bank of Thailand is closely watching the situation, the central bank's Deputy Governor Suchada Kirakul said yesterday.
She also said the economy next year could face more risks due to a loss of momentum of government stimulus.
“The Fed action had less impact than previously thought. So far there is no indication of too much speculation on assets, but we cannot be complacent, since it is just the beginning of QE3,” Suchada said.
She said the latest round of quantitative easing – injection of capital into the US economy – had less impact on the baht than the previous two rounds because current economic conditions are different.
Last year when the Fed implemented QE2, the Thai economy was much stronger, as it had not been affected much by the global slowdown, she said.
Moreover, this year more Thai businesses have invested abroad, which has minimised upward pressure on the baht, she said.
“Since the Fed announced on September 13 that it would purchase of long-term bonds, the baht as of September 19 had risen only 0.5 per cent against the US dollar, a slow pace of appreciation compared with regional currencies,” Suchada said.
“The baht since the beginning of the year has increased by 2.2-2.3 per cent against the dollar and foreign capital has flowed into the bond and stock markets,” she said.
The economic outlook for Thailand largely depends on what will happen overseas, she said. One of the risks is the end of fiscal stimulus in the United States. If measures such as tax cuts are not extended, it could adversely affect the already ailing US economy.
“Fiscal stimulus has an immediate effect on consumption and investment, while monetary expansion will take time and will be less effective if market participants do not respond. These concerns led the Fed to implement open-ended monetary expansion,” she said.
Thai domestic consumption and investment may decelerate next year as some fiscal and monetary measures come to an end, such as the first-car ownership scheme or soft loans under the responsibility of the central bank.
“Public spending will continue to drive growth, except that the government will face delays in budget disbursement,” she added.
