Thai central bank chief concerned at impact of inflation, global recovery on Thai economy

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BANGKOK, July 19 – Thai economic growth in the second half of this year will be close to the figure in the first half of this year, amid concerns of the possible impact from high inflation and the global economy, Bank of Thailand Governor Prasarn Trairatvorakul said on Tuesday.

 

The country’s Gross Domestic Product (GDP) this year is projected to expand 4.1 per cent, he said.

Risk factors in the second half of this year are the inflation rate, likely to rise, and uncertainty over American and European economic recovery, Mr Prasarn said at a seminar on Thailand’s economic outlook in the post-election period.

The central bank governor commented that the way Europe has handled its problem is only buying time, amid fears that the malaise may spread to other regions. Meanwhile, the US has already exhausted almost all measures to solve its own economic problems, and there are no other alternative tools available to tackle the problem.

Recently, capital flows from the West into Asian markets–including Thailand–have affected the currency exchange rates and that must be closely monitored, he added.

Regarding the new Pheu Thai Party-led government’s campaign pledges–in particular the agricultural produce mortgage schemes, wage and salary hikes and the reduction of the cost of living, Mr Prasarn noted that how much money will be spent on implementing the policies will be watched closely.

Although the construction of public transportation systems will benefit the economy in the long-term, but the government’s annual budget is worrisome. If the new government uses additional budget, it may further burden the country’s public debt, he said.

As of the end of May, the government’s outstanding public debt stood at Bt4.28 trillion, or 41.08 per cent of GDP, an increase from April’s outstanding public debt by Bt30.86 billion, Public Debt Management Office head Chakkrit Parapuntakul, said on Tuesday.

Out of Bt4.28 trillion in the outstanding public debt, Bt3.02 trillion baht is in loans directly borrowed by the government.

The central bank governor advised that the new government should put less weight on fiscal policy in an attempt to reduce inflationary pressure. In addition, implementing 300 baht daily minimum wage hike should be carried out gradually to allow the private sector to adapt.