Pridiyathorn hails rate cut for lift in exports via curb on baht
Play
DEPUTY PRIME Minister MR Pridiyathorn Devakula said yesterday that the reduction in interest rate would help exports via depreciation of the baht.
“When interest rates are down, the baht will not be strong and this will definitely help exporters and is something that is needed the most.
“Some commercial banks have already lowered their rates but the thing that I like most about this is that it will help prevent the baht from getting any stronger,” he told the press after delivering the keynote speech at the CLSA Asean Forum.
The Bt23-billion job creation programmes would commence on time, he also said.
Gross domestic product could expand by 4 per cent this year because of the low base.
The recovery is also starting to pick up and will be much better once the private sector starts to build plants after receiving permits and Board of Investment approvals.
The delay by the previous government in issuing operating permits, or Ror Ngor 4s, to about 870 factories was fixed.
He has said before that he expects construction to begin this year, while Hiranya Sujinai, acting secretary-general of the BoI, said last month that she expects small BoI projects to begin construction in the second half of this year.
The BoI approved 3,469 projects worth Bt2.19 trillion last year.
The lower interest rates “will help exporters but export growth is not dependent only on the strength of the currency since it is about market demand.
“Everyone has taken the same hit and I have spoken to a Malaysian minister who told me that their exports in January were not doing so well and were in the negative zone as well,” Pridiyathorn said.
Trimming the interest rate would not upset the outflow situation and “there is nothing to worry about since Thailand has ample reserves”.
The impact from easing loan rates on the economy would not be seen right away.
“What’s important is the potential and the question is will they do it again later. If they give a signal that they will continue that will be significant. If they are ready to do it, that will be a good sign,” he said.
All the contracts under the Bt23-billion job creation project – part of the Bt362-billion stimulus package announced last year – will be signed by the end of this month.
“The projects under the Bt23-billion project were delayed because the budget that was set up quoted the old prices, so it had to be recalculated since nobody wanted to bid in January and I have fixed that issue.
“Now all the contracts will be done this month. Construction will start right away because these are small projects and some have already commenced,” he said.
These are small maintenance projects such as fixing up schools, hospitals and other public buildings.
“This will provide jobs, which will increase purchasing power at the grassroots level,” he said.
“GDP can expand by 4 per cent in 2015 and the government is doing everything it can to help via the acceleration of spending.
“The rate of disbursement as of February is better than the same period last year. Government spending will slow down in April since there are many holidays but it will pick up again in May,” he added.
Prinn Panitchpakdi, head of CLSA Securities (Thailand), said exports were slowing down mainly because of the intended slowdown of economic growth in China.
However, the Thai economy might not be in as bad shape as it looks since there is still demand from the United States.
Domestic consumption has already begun to recover but the figure was largely clouded by the poor showing of the auto industry.
“Domestic consumption excluding automobile consumption is already looking better while tourism is recovering, but still not in full force.
“Inbound visitors from Europe and Russia have slowed down but Chinese visitors have already come back big time and this will help the economy since growth in the tourism industry normally has a large multiplier effect.
“CLSA believes that Thailand’s GDP can expand by at least 4 per cent this year,” he said.
The Monetary Policy Committee should have cut the interest rate at its previous meeting in January because that would have helped the economy more.
The interest rate cut would boost market and consumer sentiment, which is much needed now.
“The problem is not liquidity. The problem is sentiment and it remains to be seen how much the lowered interest rate will improve the mood,” he said.
The baht should be stronger after the second half comes and towards the end of the year once the economic recovery is more apparent from the expected increase in government spending and domestic consumption.
More foreign capital is coming this way via investments and tourism, especially from Japan and China, since they are waiting on the sidelines and will jump in once things become more tangible here.
The baht is expected to trade at around Bt31 per US dollar by the end of this year. The baht was trading at Bt32.710 on Tuesday before dropping to Bt32.853 after the MPC announced the rate cut on Wednesday.
It was trading at Bt32.866 as at 1.30pm yesterday.
