BOT fears volatility amid crisis in major economies
The Bank of Thailand yesterday raised the spectre of more money market volatility, given no real solution seen in major economic powers' crises, while giving reassurances that the country has both monetary and fiscal tools at hand to deal with extremes.
"There is no clear light at the end of tunnel. Any news released will affect money markets in the short term and prompt [market] volatility," said Prasarn Trairatvorakul, governor of the central bank.
The world could face frequent shifts in flows for a while as the Group of Three has no answer for how to emerge from economic crisis.
The baht has gone on a rollercoaster ride, skyrocketing up to 28 per US dollar and diving thereafter.
Thailand has to maintain its policy space with measures for financial system stability and fiscal stimulus, while the public debt level must not be too high and the current deficit must not be too wide, he said.
The government needs to communicate clearly with investors and markets on Thailand’s economic situation, while upholding local and foreign confidence.
The central bank was closely monitoring capital movements.
Thailand’s current economic and financial situation was totally differed from that during the 1997 financial crisis.
The country’s floating exchange rate regime is flexible and financial institutions are strong with more prudent inspection and supervision, and sufficient provisions, he said.
According to the World Economic Forum ranking this month, Thailand moved up to 37th in competitiveness. Its fundamentals and efficiency enhancement factors were high, but its business potential and innovation factors were quite low.
Upgrading Thailand to an innovation-driven economy requires the private sector to improve manufacturing and innovation and the government to increase promotion of the business environment for competitiveness. The central bank expects Thailand to continue its economic expansion on the expectations of most financial institutions of growing credit, he added.
According to the National Institute of Development Administration’s macro forecast, gross domestic product is expected to expand 4.9 per cent on the back of a likely export recovery in the fourth quarter, with growth for the whole year estimated to come in at 3.7 per cent.
Inflation is projected at 2.5 per cent, while the policy rate is forecast to remain at 2.50 per cent.
