Monetary committee set to reduce export growth projection

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BANGKOK, Aug 31 – Thailand’s Monetary Policy Committee (MPC) will likely reduce the 2012 export growth projection from the earlier projected seven per cent, an MPC member said Thursday.

Narongchai Akrasanee said the possible export growth at less than seven per cent will consequently impact GDP growth which was earlier set for 5.7 per cent.

The MPC, chaired by Bank of Thailand (BOT) Governor Prasarn Trairatvorakul, will meet Wednesday. The monetary committee is a major central bank panel, responsible for setting its stance on monetary policy.

Finance Minister Kittirat Na-Ranong last week adjusted the export growth projection from 15 per cent to 9 per cent but the National Economic and Social Development Board (NESDB) projected a 7.3 per cent growth.

The government’s spending is not lower than its target, particularly the Bt350billion investment fund for sustainable water management, Dr Narongchai said.

No projects have yet received investment funds. Dr Narongchai said he hoped the government will speed up spending during the remaining months to substitute for declining exports.

The government’s upcoming policy report and statement to Parliament to mark its first year in office, especially on water management projects, should be clear and create confidence among investors, Dr Narongchai said.

“From earlier data of the NESDB and the Bank of Thailand, it is known that export growth will not reach 15 per cent,” he said. “The latest data does not assure us that it will reach [even] seven per cent.”

Dr Narongchai said the MPC’s upcoming meeting may need to reduce the export growth and GDP targets. The monetary committee earlier reduced the GDP projection from six per cent to 5.7 per cent.

He said the risk on economic growth is higher than inflation and the MPC would be ready to ease the monetary policy from the present policy interest rate of three per cent.

If the MPC decides to lower the policy interest rate Sept 5, the decision will be based solely on the country’s economic figures, and not due to political pressure, Dr Narongchai said, admitting that foreign investors are concerned with the rocky relationship between the armed forces and the government which recently resulted in the transfer of high-ranking officers in the Defence Ministry.

From the investors’ experiences, the government is always in a hot seat when the armed forces are unhappy, he said.

He insisted on using interest, and not the exchange rate, as the primary tool in setting monetary policy, indicating that Thailand has learned the lesson that it is impossible to set an exchange rate target.