Central bank chief sees silver lining for Thai economy

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The Thai economy will recover in the second half of this year after lethargic bouts in the first two quarters, according to central bank governor Prasarn Trairatvorakul.

In his speech on Asia Driving the World, he said the economic comeback would be the result of several factors including high employment rate, people’s improved income, signs of more vigorous economy in the US and Japan, and more investment in the private sector.

The monetary policy has become more relaxed, given the interest rate at 2.5 percent, which is reasonable compared to inflation, and commercial banks’ more flexibility in extending loans, he said.

The planned budget deficit for the 2013 and 2014 fiscal years reflects the government’s determination to boost investment, especially on the Bt2 trillion spending for infrastructure development and Bt350 billion water management plan.

If the gross domestic product (GDP) is lower than 5 percent, it is not a concern as an economic slowdown is normal, he said.

The GDP is within the predicted framework, while emphasis should be given to the global money market which remains volatile and sensitive to information, he said, adding that the volatility could affect private businesses, which should manage risks.

The country’s risk of higher household debt will tighten liquidity in the household system and affect spending among lower income people, Prasarn said.

He pointed out that China’s economic slowdown will affect economies in the Southeast Asian region in the short term but it will be positive for the region in the long run, as China’s economy will become sustainably strong, expanding by 7-7.5 percent.