BOT cuts export forecast to 4.4%
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Bank of Thailand has slashed the 2012 export target to only 4.4 per cent, the action that explained why it announced the surprise policy rate cut last week.
Though lowering the export target from 7 per cent, the central bank maintains the economic growth forecast at 5.7 per cent. However, it cut the 2013 forecast from 5 per cent to 4.6 per cent.
On Oct 17, the central bank's Monetary Policy Committee surprised the market with the cut in the policy rate by 25 basis points to 2.75 per cent. The lower rate is widely expected not to spur lending growth, but to slow down capital inflows which increase as a result of quantitative easing in developed economies.
Larger inflows would strengthen the Thai baht and hence pressure Thailand's export.
In the first nine months of this year, Thailand's export decliened 1.13 per cent from the same period last year.
The International Monetary Fund (IMF) and the World Bank have warned that the influx of "hot money"could cause currency rallies and asset bubbles.
For this reason, the emerging Asian economies have been urged to keep a close watch on possible risks set off by the inflows and outflows of hot money to the region.
The Asian financial crisis of 1997 98 was preceded by surges of short-term private capital inflows into the booming economies of the region, contributing to inflationary pressure and asset bubbles. When this money fled as the crisis unfolded, central banks were unable to hold the line and the region's currencies depreciated sharply, foreign debt burdens jumped and financial crises ensued.
