Central bank cautions on exceptionally strong baht


BANGKOK, April 22 – The Bank of Thailand (BoT) insisted today that the policy interest rate at 2.75 per cent remains favourable to credit extension and the overall Thai economy.

BoT Assistant Governor Paiboon Kittisrikangwan, however, admitted that the Thai baht has surged too sharply and rapidly in light of the strong economic fundamentals.

The fact that the BoT governor expressed concern about the baht getting stronger than the economic fundamentals was a warning to which investors and those involved in the money market must pay extra caution, he said.

“We have yet to monitor the private sector’s adjustment to the situation before deciding if an implementation of available measures is necessary. Every measure has its pros and cons in the long term,” Mr Paiboon said. “We must wait for the right timing and for the market to adapt to the situation.”

He said the Monetary Policy Committee has forecast Thailand’s economic growth at 5.1 per cent this year based on factors contributing to the baht appreciation, expansion of households’ debts and the volatility of monetary stability due to surging property market.

Former BoT Governor Chatumongkol Sonakul suggested that the BoT purchase foreign currencies to solve the problem of strongly-appreciated baht, adding that the policy interest rate is effective in maintaining inflation.

Reducing the interest rate will stimulate buying which may result in lending problems and a bubble in the property sector, said the former finance minister, indicating that the kingdom’s foreign reserves were as high as US$200-300 billion.

Deputy Commerce Minister Nuttawut Saikua said the strengthening baht has forced some export companies to shut down but applications for new companies remained high, registering a five per cent increase compared to the same period last year.

Over 19,600 new companies were registered in Q1 – the record for 111 years — and 20 per cent higher than in Q1 last year, he said.