Domestic demand key to economy: BOT
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The economy has to rely on domestic demand to achieve the growth target of 1.5 per cent this year as the export sector is too weak to play its traditional driving role, the Bank of Thailand said yesterday.
“The current relaxed monetary policy is still necessary and we will have to wait until the economy has recovered its strength,” Mathee Supapongse, assistant governor for the Monetary Policy Group, said yesterday.
Private consumption, investment and fiscal spending will have to pick up the slack.
The present relaxed monetary policy is still accommodative, with the benchmark interest rate idling at 2 per cent.
The Monetary Policy Committee will review its projection of 3 per cent for export growth this year at its next meeting because of the slower-than-expected recovery of the export sector.
However, since the country imports mostly raw materials to manufacture products for the export sector, the slowdown of both imports and exports should cancel each other out.
“Thailand still depends on exports for growth but if both imports and exports are down, the net of the two will not affect gross domestic product that much, and this situation is unique for the country,” he said.
Exports in the first seven months contracted by 0.2 per cent. Most worrisome is exports of electronic products, which have recovered at a much slower rate than in neighbouring countries, while sales to Asia, China and the European Union, the country’s major trading partners, are still languid.
According to Bloomberg, China’s imports shrank by 1.6 per cent in July from last year.
Pornsil Patcharintanakul, vice chairman of the Thai Chamber of Chamber, said on Monday that trying to stimulatie the export sector was hopeless.
There is nothing much the country could do, since the sector is largely dependent on the global economic recovery, which does not look so good for the rest of the year.
The central bank will arrange a symposium on “Rethinking Finance for Sustainable Growth” for October 16-17 to address the problem of small and medium-sized enterprises’ lack of access to finance and high household debt, along with evaluating the government measures that currently address these issues.
There are 2.7 million SMEs in the country and only 40 per cent can get access to financing via commercial banks.
