Central bank panel ready to take more action to deal with rising baht

The statement was made on Tuesday (January 7) at the central bank and analysts' meeting at the Bank of Thailand (BOT)'s headquarters amid rising concerns over the baht's exchange rate moving beyond economic fundamentals.
Titanun Mallikamas, assistant governor of the BOT's Monetary Policy Group, stated that the MPC had maintained the expansion rate of the Thai economy would be lower than the previous forecast. 
However, the global economic outlook has started to stabilise. As a result, Thai exports and economic growth will tend to improve in 2020, he said.
Furthermore, an accommodative monetary policy during the recent period will support economic growth and bring the rise of headline inflation towards the targeted rate. 
The committee will monitor economic growth, inflation, and financial stability as well as associated risks, in deliberating monetary policy going forward. 
The committee said it stands ready to use policy tools as appropriate.
The committee expressed concerns over the appreciation of the baht against trading partners and competitors’ currencies even though the appreciation of the baht has slowed down and recently, its movement has been more two-way. Therefore, the committee suggested closely monitoring exchange rates and capital flows amid elevated external uncertainties as well as the effectiveness of the relaxation of foreign exchange regulations to encourage capital outflows. It will also assess the necessity of implementing additional measures.
The overall Thai financial system is stable but it has continued accumulating vulnerabilities because of an economic slowdown and the prolonged low interest rate. The committee believed that the policy interest rate as well as microprudential and macroprudential measures should be applied in controlling the risk to the stability of the financial system.
The committee thinks that the Thai economy is facing structural problems which should be firmly addressed by all related parties. In the labour sector, for example, the emergence of the ageing society has reduced the number of working population. 
More businesses replaced human labour with automation. Employment has been more of outsourcing and sub-contracting. Workers from these kinds of jobs are less stable and endowed with less welfare than the permanent worker. Moreover, it is more difficult for laid-off workers to return to the labour market, especially aged and skills-mismatch workers. 
In the investment sector, the continued increase in the current account surplus reflects the structural problem: there is high savings but low investment, especially in the business sector. 
Compared to other countries, the Thai investment rate is lower although the savings have continually increased. Therefore, we should encourage both public and private investment which will increase economic growth in the short term and enhance the potential of economic growth in the long term, added the statement.

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