Partial US gov’t shutdown to impact Thailand only slightly

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The partial US government shutdown will have only a slight impact on the Thai economy while the US decision on its debt ceiling, scheduled for October 17, should be closely monitored, a senior Finance Ministry official said.

Ekniti Nitithanprapas, deputy director general of the Fiscal Policy Office, said some US state agencies have been temporarily suspended but a shutdown for one month would affect its gross domestic product (GDP) at only 0.1 percent.


The negative impact should be short term which is different from the situation in 1995 when government shutdown lasted 21 days, he said, adding that investors have predicted the phenomenon while global capital and stock markets have moved higher and the Thai currency has strengthened.

Foreign capital has flowed back into the Asian market, he said.

Ekniti said it was predicted that the US would decide on October 17 to expand its debt ceiling – a decision that could have an impact on the monetary and stock markets.

“We also have to follow up on the Federal Open Market Committee’s meeting late this month on whether the US will slow down its economic stimulus through quantitative easing (QE). It is, however, predicted that the US Federal Reserve would retain QE measures,” he said.

The US will eventually revoke QE in the future, resulting in higher interest rates while the Thai government and investors should speed up their investments at the moment, said Ekniti.

Once the government invests in mega infrastructure projects, the private sector will follow suit and Thailand’s GDP growth could reach 5.1 percent next year, he pointed out. This year’s GDP growth is projected at only 3.5-4 percent.

Pakorn Peetathawatchai, Stock Exchange of Thailand executive vice president and head of the SET Corporate Strategy and Finance Division, said the US government shutdown has contributed to volatility among global and Thai bourses and it could have a negative impact on the stock market if the problem is prolonged.

He warned Thai investors against volatility from capital inflows and outflows.