Thirachai expresses concerns on outflow impacts
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Former Finance Minister Thirachai Phuvanatnaranubala expressed his concerns over the impact of foreign capital outflows to the dollar/baht exchange rate as well as the property sector.
On his Facebook page, he said that continued outflows will weaken the baht against US dollar, and this will lessen a chance that the Bank of Thailand would cut the interest rate.
"Whenever the baht weakens, inflation would be kicked higher. From a downward trend, the interest could be on the upward trend," he said.
On the property market, he said that the financial authorities should closely monitor the negative impacts to ensure financial institutions' strengths. He noted that in the past months, huge foreign capital flowed into the bond market and later spurred investment in properties. Outflows would somewhat affect the industry, he said.
Emerging markets are facing foreign capital exodus as investors shift money back to the US, encouraged by economic improvements there. Brazil recently had to raise the interest rate from 7.5 per cent to 8 per cent to tame inflation, which is now at 6 per cent. The country recently lifted taxes on foreign bond holdings, imposed during the period when inflows were huge.
He noted that inflows were large in the early months of this year, as the Finance Ministry failed to put a brake. The ministry was too focused on having the policy rate cut, he said.
