Greek financial tragedy will have little impact on Thailand: Finance Ministry

However, Asian capital markets have been hit, with the Stock Exchange of Thailand’s index dropping by 15.57 points to 1502 basis points as of 3.30pm yesterday as the possibility of “Grexit” rises and is feared to cause panic selling. The turnover yesterday was Bt21.909 billion.
The decline in Thai shares is in line with regional movements where shares in Malaysia’s Kuala Lumpur Composite Index, Indonesia’s Jakarta Stock Exchange Composite Index and Singapore’s Straits Times Index have dropped by 19.52, 46.24 and 42.18 points respectively during the same period.
The value of the euro currency strengthened from 1.1167 euro per US dollar on Friday to 1.1080 euro per dollar as of 3.30pm yesterday, while the Thai baht depreciated from Bt33.78 per greenback to Bt33.786 during the same period.
Maybank Kim Eng Securities expects the Thai currency to stand at around Bt34.5 per dollar by the end of the third quarter.
Gold fetched $1,179.55 (Bt39,892.40) per ounce yesterday compared to US$1,172.90 per ounce on Friday.
“The Thai government does not hold any Greek government bonds, which means we are not one of their creditors, so there will be no effect on Thailand’s finances if Greece defaults on June 30 [today],” Finance Minister Sommai Phasee said yesterday.

“There will be some short-term effects due to the psychological impact, but the influence of the Greece situation will be limited and differ from the problems that hit Thailand during the 1997 tom yam goong crisis. This time, the crisis in Greece has been going on for a while, and most of Europe has already taken measures to deal with it,” he added.
Sommai also said the mass withdrawals that forced Greek banks to close yesterday would not have much effect on the capital flow to Thailand, as it was more of a domestic problem.
Greece imposed controls yesterday by capping withdrawals at 60 euro per account per day for Greek nationals and restricting overseas cash transfers. There was no cap for foreigners. The Greek government said that banks would remain closed until July 7 – a sign that Greece is preparing for the impact of its default on the International Monetary Fund (IMF) 1.6-billion euro loan. Greece has not been given any additional aid and has until today to repay all its outstanding debts.
Krisda Chinavicharana, director-general of the Fiscal Policy Office, said: “Greece only accounts for 2 per cent of the euro zone economy and most of their debtors are not governments, but institutions, so there should be no effect on financial institutions in individual EU countries.
“The office is not concerned about the effects Grexit will have on Thai exports, as the impact will be limited. Also, the EU economy is still recovering and the effect on the Thai baht will be temporary,” he added.
On a July 5 referendum, Greeks will be asked to decide on whether they will accept a draft agreement submitted by the European Commission, the European Central Bank and the IMF at a Euro group meeting held last Thursday.
Uwe Parpart, chief strategist and head of research at Hong Kong-based investment firm Reorient, said the referendum will not change anything as IMF’s managing director, Christine Lagarde, had told the BBC late on Saturday that “legally speaking, the referendum will relate to proposals and arrangements which are no longer valid”.
“As things now stand, Greece will run out of money by Tuesday and is unlikely to meet the 1.6-billion euro payment to the IMF. Once the Greek sovereign is bust, certainly the ECB [European Central Bank] can no longer uphold the fiction of the soundness of the Greek banks, a precondition for continued emergency liquidity assistance,” Parpart added.