BOT plays down effect of ECB rate-cut decision

THE EUROPEAN CENTRAL BANK’S decision to cut its benchmark interest rate by 10 basis points to 0.05 per cent will have no direct impact on the Thai economy, says the Bank of Thailand, which is currently paying more attention to developments at home than to external factors.

BOT spokesman Chirathep Senivongs Na Ayudhya said yesterday that the ECB had lowered the interest rate as a pre-emptive measure to slow the descent of the euro-zone inflation rate, which declined to just 0.3 per cent last month – from 0.5 per cent in June.

The ECB’s inflation target for 2014 was set earlier in the year at 2 per cent, but manufacturing growth in the European Union slowed to a 13-month low in August, even though the EU consumption level has been on an improving trend, he said.

“The ECB is concerned that the EU economy is not recovering fully, and the decision to lower its interest rate is to facilitate a financial environment that is more supportive for investment,” he said.

“The ECB decision will have no direct impact on Thailand’s economy, but there will be some indirect impact from its effects on global capital-flow movements,” he added. 

Chirathep explained that the nature of the world’s economies in the next period would be focused on a multi-speed recovery, and China, the EU and the US would each have different measures to manage their economies.

This means that global capital flows will be quite unstable, and there will be more exchange-rate fluctuation, but the central bank is currently “at ease” with such risks.

“Asia’s economy is still moving alongside the recovery of the world’s economy, while the baht has been moving in two directions and there is stability, therefore the BOT is not particularly worried about external factors at the moment,” said the spokesman.

Chirathep said the expected instability in the global flow of capital was currently not worrisome, and the central bank still had the tools to manage a worsening situation, should the need arise.

The BOT is, therefore, paying more attention to the current situation in the country, such as “developments on public and private investments and the eco

 nomic policies of the new government”, he stressed.

Meanwhile, the central bank is maintaining its projection that the government-account balance will be in surplus this year, although a slight deficit in the account balance in the future might be a positive thing if the deficit were caused by an increase in public investment and not by a rise in the level of imported energy, he said.

“If the deficit in the government-account balance were caused by an increase in public investment, it would be welcome news – and that is something that the country has been awaiting for quite some time now,” he added.

Meanwhile, in other news, the BOT has decided to delete information on around 600,000 debtors with non-performing loans from the National Credit Bureau (NCB) system, to give them a fresh start and encourage them to get back into the formal loan system rather than turning to sources of finance outside the system.

Most of the debtors have low-level loans and have been on the blacklist since the 1997 financial crisis. All of them will still have to pay back their loans and their names have only been taken off the credit-bureau list to lower the barriers keeping them from gaining access to finance, said Ronadol Numnonda, BOT assistant governor for the Supervision Group.

The central bank has also changed its regulations to allow financial cooperatives to access NCB records, to provide them with more information on debtors when considering giving out loans, he said.