Govt prepared to cope with funds inflows from euro-zone stimulus programme

Prime Minister General Prayut Chan-o-cha has asked the Finance Ministry and the Bank of Thailand
to prepare measures for possible impact from the euro zone’s
quantitative easing (QE) programme, during a meeting yesterday.
The European Central Bank (ECB) on Thursday said it would buy 60 billion euros (US$69 billion) in private and public sector bonds per month from March until the end of September next year. The amount is above market expectation of no more than 50 billion euros.
The SET Index yesterday (23) rose by 37.99 points or 2.43 per cent to close at 1,598.33 points. The baht has appreciated from Bt32.97 per US dollar on January 5 to Bt32.60 yesterday while the country’s policy interest rate is currently at 2 per cent.
Wall Street jumped 1.5 per cent and European shares climbed to a seven-year high on Thursday. All Asian markets went up yesterday after the ECB launched a landmark bond-buying stimulus programme that buoyed investors’ risk appetite, drove bonds higher and kept the euro pinned to near 11-year lows.
Fiscal Policy Office director-general Kritsada Jinavijarana said the fiscal measures, including assistance to Thai exporters and cost reduction for business operators, had been taken.
“Tax cuts for small and medium-sized enterprises, tax reduction on raw materials and machinery, and nano-finance are also included,” he said.
He said there might be some BOT monetary measures, particularly when the baht is affected by capital movement. The situation could bring about a currency war in several countries.
“The extent of the impact on Thailand will depend on the amount of capital flowing into the country.
QE of 60 billion euros monthly is
big enough to affect the Thai
currency,” said Kritsada.
Finance Minister Sommai Phasee said the euro zone’s aggressive QE policy could lead to appreciation of the baht due to increase in global liquidity, which could find its way to emerging and promising markets, including Thailand. This situation could lead to lower exports.
However, he said the BOT has a choice to use its international reserves as well as reduce the policy rate to take care of the situation since the situation can have a negative impact on the real sector.
Meanwhile, BOT spokesman Chirathep Senivongs na Ayudhya said “there was no irregularity in the baht situation” yesterday. “The BOT, however, will keep a close eye on the global funds flow and its impact on the baht in the coming period,” he added.
CIMB Thai Bank’s head of research centre Amonthep Chawla said that even though the bond buying would be in Europe, the high liquidity would bring capital inflows to Asia and emerging markets, including Thailand.