Thai central bank: Special measures not needed to cope with eurozone crisis

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BANGKOK, June 18 – The Bank of Thailand (BoT) is confident that the strength of the Thai financial system and economic fundamentals are sufficient to not require issuing any special measures in response to potential risks of the euro zone crisis.

Speaking after the first meeting of the central bank’s Monetary Policy Committee and Financial Institutions Policy Committee on Monday, Dr Prasarn Trairatvorakul, BoT governor, said the meeting assessed the current economic conditions and concluded that the financial system remains stable with strong economic fundamentals.

Financial institutions are secured and liquidity in the system is adequate to support recovery of the Thai economy, therefore the current situation does not warrant any special measures to protect the economy.

Mr Prasarn said there is a major risk of crisis in the euro zone countries, which lingers and may affect stability of the international monetary market and the world economy. In the short term, it can cause volatility to Thailand’s capital market.

Foreign currency liquidity is likely to tighten sporadically while in the long term, the global economic slowdown can inevitably adversely impact the Thai economy.

The meeting also discussed possible policies and instruments such as the interest rate, the currency exchange rate, and capital flows to ease the potential impacts on Thai economy’s stability and monetary system.

Regarding capital flow, since the beginning of this year, foreign capital has witnessed a net inflow and there have been no signs of irregular outflow.

Regarding the election result in Greece, the BoT governor commented that it helps ease concerns over escalating problems and is seen as positive to the monetary market given  that the elected parties set up a coalition government to support austerity measures.

However, he noted that it does not mean Greece’s debt crisis will be wiped out. The establishment of the new government and Greece’s bailout packages must be monitored.

Expertise and experience of the two committees will help assess risks effectively and come up with proper tools to handle the situation, the BoT governor said.

The next meeting is scheduled for December or earlier if needed.