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Slow growth not reflective of Thai economic potential, says BOT official

Nov 19. 2019
Don Nakornthab, a senior director at the Bank of Thailand (BOT), expressed optimism about economic outlook.
Don Nakornthab, a senior director at the Bank of Thailand (BOT), expressed optimism about economic outlook.
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By The Nation

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Thailand’s economic outlook is better than what the current slow growth suggests, a central bank official said, while an analyst urged the government to increase spending to boost the economy.

 

Don Nakornthab, a senior director at the Bank of Thailand (BOT), expressed optimism despite gross domestic product in the third quarter growing just 2.4 per cent year on year.

The growth rate in the third quarter from August to October was a bit higher than the 2.3 per cent  growth rate in the second quarter but the growth rate remained lower than expected, he said.

He, however, foresees a better economic performance due to the positive impact of government spending and public investment in infrastructure projects. But future growth would still be below Thailand's economic potential, he said.

The outcome of public investment still needed to be monitored closely, he said, referring to the delay in investment.

Global geopolitical risks remain, he said, adding, the US-China trade war had resulted in more trade barriers and remained a risk factor for the  Thai economy.

The Stock Exchange of Thailand Index rose 5.77 points on Monday (November 18) to close at 1,608 points.

“The market expects more government stimulus, following slower growth in the third quarter,” said Kobsithi Silpachai, head of capital markets research at Kasikornbank.

He said due to the relatively strong fiscal  position, the government has plenty of room to stimulate the economy.

The government is targeting fiscal deficit at Bt469 billion for fiscal 2020, with plans to spend Bt3.2 trillion.

Even though the Thai economy remains in slow growth mode, the baht continued to trade strong at around Bt30.24 to the US dollar yesterday. Investors still see baht-denominated assets as a safe haven due to Thailand's high current account surplus. Thailand also has ample international reserves of $220 billion. 

The central bank has recently  cut its key interest rate to 1.25 per cent and introduced measures to encourage capital outflows but it has had little effect in reining in the baht.

“It doesn’t work, the central bank's move is too little and too late,” said Kobsithi. The stronger baht relative to other currencies has aggravated the problems of Thai exporters in selling their products given the global slowdown.

To strengthen the economy, we need structural reforms, Kobsithi suggested.

“Our ageing population means we are becoming more and more like Japan each day,” he said, adding that monetary stimulus will become less effective.

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