BOT gets thumbs up for holding rate

“The baht’s competitiveness is at the right level compared to others in the region. Import costs have obviously increased, but it is not one of the private sector’s main concerns when it comes to investment decisions,” said Supant Mongkolsuthree, chairman of the Federation of Thai Industries.

He said he agreed with the Monetary Policy Committee’s stance since the baht at about 36 per US dollar is a boost for the export sector while the currency and interest rates are not obstacles to investment.

“The main problem regarding private investment right now is the lack of confidence. But I believe that the confidence level will rise once the government’s stimulus packages become more tangible and the mega-projects commence construction as planned,” he added. Vallop Vitanakorn, vice chairman of the Thai National Shippers Council, said the MPC’s move was largely expected, while the weakened baht has increased exporters’ liquidity, but not the volume of products that are being exported.

“Yes, we [exporters] are gaining in monetary terms from the exchange rate, but global demand is still low.

“The deprecation of the Thai baht is in line with the region, which means the currency’s competitiveness has only improved slightly. Its level is in the middle of currencies in the region,” he said. The baht has slipped 8-9 per cent year to date but the Malaysian ringgit, the Indonesian rupiah, the Singapore dollar and the Philippine peso have also faded by about 18 per cent, 14 per cent, 6 per cent and 4 per cent, respectively he said.

The baht was trading at 35.99 as of 4pm, after the MPC announcement. It showed no significant change from its opening at 35.95 yesterday. 

The MPC said the prospect of US interest rates rising today had been factored in its decision yesterday and the central bank was ready to respond if needed. 

“The Fed’s decision on its interest rate is not one of the MPC’s main assumptions. But it has been considered and we have guidelines for both situations no matter what the Fed decides,” said, Mathee Supapongse, the MPC’s secretary.

“If there is an increase in fluctuations, we are ready to mitigate it,” he added.

The central bank is ready to step in if the baht falls too rapidly. The weakened baht at this level is supporting the recovery of the economy and its decline in value is in line with the region from the slowdown in China’s economy and the strengthening of the US dollar.

The recent increase in non-performing loans is mainly due to the slowdown of the economy. It does not raise concerns for the country’s financial stability, since most of the increase was from retail loans, which play only a small role in the system.

The MPC is still expected to revise down its GDP projection for this year, currently at 3 per cent, on September 25. The government’s stimulus measures have been included in the new forecast, but they are not enough to outweigh the negative external factors on the Thai economy especially the slowdowns in China’s and Asian economies, he added.