Govt unfazed for now by looming 'currency wars'

The question was raised yesterday by Suthichai Yoon, chairman of Nation Multimedia Group, who moderated a seminar session. Asked whether Thailand would step into a currency battle after the Monetary Authority of Singapore made a surprise monetary-easing move that sent its currency falling sharply on Wednesday, Narongchai bluntly said: “No. I think the Bank of Thailand is in a position to manage the baht very well. The government policy is clear that we will have a ‘soft currency bias’ … at least for the next few weeks. Beyond that we don’t know,” he said.
Narongchai said he expected more uncertainties in global exchange rates this year, citing many factors including the Swiss franc’s “divorce” from the euro and the political change in Greece that may lead to its exit from the euro zone.
“If that’s the case, it will be the beginning of the end,” he said.
Yesterday’s seminar entitled “Thailand Moving Forward: Economic Reforms under the Interim Government” was organised by Siam Commercial Bank Plc and co-organised by The Nation, Now26 TV, and the Asian Wall Street Journal.
SCB chief economist Sutapa Amornvivat told the session that she agreed with Narongchai’s assertion that there is now the beginning of a currency war. She told the audience to watch out for a reaction from South Korea’s central bank at its monetary policy meeting next month.
Because of the diversity of the Thai economy, Sutapa said the impacts from these external factors would be mixed. Monetary-easing policies by central banks that have inflated asset prices, and the shrinking oil prices, will be more beneficial to urban people and some business sectors such as exports, but rural people and farmers as well as commodity producers will suffer the most.
She said the issue of farm subsidies “will put a lot of pressure on the government for months to come. We’re watching how the government will respond” to the impacts on farmers, she said.
Narongchai said the government felt more comfortable with capital inflows than outflows. Thanks to measures unveiled last year, he was confident that the Thai economy would improve this year regardless of the currency and oil-price factors. “These two factors are not so disadvantageous to Thailand,” he said.