By THE NATION
“We have started to see foreign fund inflows returning to emerging markets, including Thailand. However, we need to monitor the continuity of this inflow,” said Tim Leelahaphan, economist, Standard Chartered Bank (Thai).
Around Bt130 billion worth of funds exited the Thai debt market during the first five months of this year, although there has been a net inflow of about Bt50 billion since June.
“Although Asian markets seem to be recovering from Covid-19 somewhat better than in the West, the situation still needs to be monitored closely. If the fund inflow continues, the baht is likely to strengthen against the US dollar. Also, if tourism in Thailand returns this will also be a positive cue for the baht,” added Tim.
Standard Chartered Bank expects the baht to be valued at 31 to a US dollar, or lower at the end of 2020.
“So far fiscal policy and monetary policy have helped shore up the Thai economy. However, the market is taking a wait-and-see approach on how the stimulus package will be shaped and the continuity of fiscal policy for the remainder of the year,” Tim said.
Standard Chartered Bank expects the Bank of Thailand’s Monetary Policy Committee to cut the policy rate by another 25 basis points at its August meeting.
“The policy rate is approaching the zero level. Financial markets are waiting for clearer communication from the Thai central bank regarding its next move that will really benefit the business sector, apart from the impact it will have on financial markets,” said Tim.
“There are questions that need to be answered. Will a negative policy rate be applied in Thailand? Will the central bank impose a quantitative easing programme or yield curve control? These are the questions that financial markets and the business sector are closely monitoring.”
Standard Chartered Bank has maintained its forecast for the Thai economy to contract by 5 per cent this year. The economy is expected to shrink by 13 per cent in the second quarter before bottoming out.