Thailand safe from 'Grexit': Sommai
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THE SET INDEX dropped by 1.10 per cent yesterday as Asian markets sank after Greece voted "no" to further austerity, but Finance Minister Sommai Phasee insisted that Thailand's strong financial foundations meant that Greece's finance problems and the
As for the Greeks, Sommai said Sunday’s referendum results would make little difference – they are the victims of a misguided populist policy.
The SET Index slipped from Friday’s close by 16.36 points to close at 1,473.23 with a total trading value at Bt32.145 billion. Meanwhile, the baht weakened from 33.77 per US dollar on Friday to 33.82.
“Whether it was a ‘yes’ or a ‘no’ vote it was still going to hurt, and the people who will suffer are the Greeks. This is the perfect example of how a government’s extreme populism and lack of financial discipline can affect its people,” he said.
Sommai believes that the European Central Bank (ECB) will continue to help Greece despite the “no” vote and in any case, a further slowdown in China’s economy is a “much scarier” prospect than a Greek exit from the euro.
“Since 76 per cent of Greece’s debts are owed either to institutions or European Union member states means that the negotiations will continue,” he predicted.
As for Thailand’s financial condition, “it is strong, as seen in the public debt, which stands at 43 per cent of GDP, while Greece’s public debt is 180 per cent of GDP.
The 1.7-billion-euro payment to the International Monetary Fund that Greece has missed is [equivalent to] only 1 per cent of Thailand’s reserves,” he added.
Thailand’s official reserves stood at US$178.5 billion in June.
The Bank of Thailand’s deputy governor for monetary stability, Pongpen Ruengvirayudh, said the escalation of Greece’s debt crisis was posing major risks to the global economy, which could affect Thailand, but the impact would not be severe as the financial and trading links between Thailand and Greece are minimal.
“There might be short-term fluctuations in the financial markets but the impact will not be severe,” she said.
Pongpen noted that no direct financial transactions have taken place between Thailand and Greece, and any indirect impact via Thailand’s exposure to financial institutions in Europe would be limited.
Thailand’s exports to Greece account for 0.06 per cent of the total, while Thailand’s major trading partners in Europe, such as Germany, Britain and the Netherlands, are expected to receive minimum impacts from the Greek situation.
“There was little impact on the baht, as it had only depreciated by 0.14 per cent by [yesterday] morning, which was less than other currencies in the region, which deprecated by around 0.3-0.7 per cent from the strengthening of the US dollar,” Pongpen said.
Foreign holdings of Thai government bonds amount to only 8.8 per cent, while the outflow of foreign capital from the Stock Exchange of Thailand is expected to be limited.
Foreign investors are already underweighting on Thai shares and there is no significant change in the yields of Thai bonds, she added.
Yanis Varoufakis, Greece’s minister of finance, has resigned as Prime Minister Alexis Tsipiras wanted him to step down to make it easier to deal with creditors, particularly in the Eurogroup of finance ministers.
Varoufakis had been expected at an emergency meeting between the Greek government and the country’s commercial banks on how to save them from collapse, but his resignation meant that the meeting did not take place and Greek banks remained closed yesterday.
The ECB was also supposed to decide yesterday whether to continue to extend emergency liquidity assistance to the Greek banks, which are at risk because they carry heavy exposure to their government’s debt.
