According to a report by the Bank of Thailand (BoT) presented to the Economic Cabinet, the tourism sector got the most impact from political rift within the past five months and had just been revived in June. The sector was deemed to turn normal by year-end. However, overall economic situation has shown a sign of continuous growth amid recent internal chaos with the rise of investment made by the private sector.

Unemployment rate was reported at an appropriate level or 1.1 percent, while consumers’ and private sector’s confidence in Q1 was improving which resulted in the strengthening of financial institutions and high liquidity.

The Economic Cabinet was also reported by the board of Investment (BoI) that within six months there were 192 billion THB of investment from 632 projects which applied for BoI promotion, a rise by 7.4% in value and 46.3% in project number compared to last year.

The Economic Cabinet stated its concern on internal politics which might be the factor of economic depression including the hike of inflation in the next few years, pointing out that the monetary policy needed to be closely monitored thereafter.

Bank of Thailand (BoT) Governor, Dr Tarisa Watanagase, opined that the PM’s roadmap would help bring peace and order back to the nation and also raise the investors’ and consumers’ confidence after being depressed due to the prolonged protest. In all, the roadmap would ease the adverse economic impacts mainly caused by the political problems. However, she said it might take time to see how obvious it would benefit the pace of GDP growth.

Dr Tarisa continued to say that the ratio of Non-Performing Loans (NPL) as of March 2010 had decreased by 4.8% to stand only at 2.5% which was deemed optimal despite the ongoing political rifts. However, the financial impact rooted by the protest movement was still unpredictable so the BoT needed to take closer look to the latest financial evaluation report of April, she said.

Mr Chaiwat Utaiwan, Executive Director of Siam City Bank, said that the PM’s roadmap was deemed the best way out of the political crisis and would allow the domestic economic situation to consistently grow if all sides had rendered cooperation.

Mr Khan Prachuabmoh, President of the Government Housing Bank (G H Bank) expressed his opinion that the roadmap would reconcile the national bonds while asking all sides to have one step back in order to move the country forward.

Finance Minister Korn Chatikavanij disclosed that if the government decided to dissolve the house as planned during late September, the drafting of the 2011 budget expenditure bill would have to be expedited otherwise it would cause a delay to the economic stimulus projects.

Despite a potential 0.9% reduction of the GDP resulting from the political chaos in the country, the BoT estimated that this year’s GDP would grow by 4.3-5.8% as of now. The central bank also indicated a high tendency for the figure to expand at the rate of 5.0-5.5% at year’s end.

However, although the GDP for the first quarter of 2010 rose at least 8%, the ongoing political tension is still considered as a factor that could notably impede the economic growth in the second quarter.

At present, the tourism sector has contracted from the initial projection of 4% to -7%. The public consumption is expected to grow 2.5%, down from the predicted 5.3%, while the investment may expand at 5.1%, lowering from the estimate of 8.9%.

The Monetary Policy Committee (MPC) decision was based on the current economy, risk factors, and balance, said Paiboon Kittisrikangwan, the central bank’s assistant governor.

It is difficult to assess the political situation due to the current high uncertainty, he said.

The MPC saw improving economy in exports, tourism and private consumption from indicators in January. Lower downside risks to growth have significantly lessened the need for an exceptionally accommodative monetary policy stance at presence, the bank said in a statement.

However, uncertainties in the global economic recovery such as high unemployment and sovereign debt problems in some countries as well as domestic risk factors including political instability and suspension of Map Ta Phut industrial projects worth billions of dollars may have an impact on consumers and investors, it said.

Inflation during the past three months has quickened its pace, with the latest headline inflation in February at 3.7 per cent owing to energy and fresh food components, while core inflation remains low. The MPC expected core inflation to rise during the coming periods in line with economic expansion, the BoT said in its statement. (TNA)

The BoT decision was made amid mounting rumors that the planned mass rally by anti-government Red Shirt demonstrators on March 14 might turn violent and lead to a destruction of ATM booths or bank branches, particularly in risk-prone areas.

Under a contingency plan to ensure the safety of commercial banks which the BoT discussed with bank executives, he said, the central bank allows bank executives to halt ATM services or branch bank operations immediately in case of emergency.

“Normally, commercial banks must report to the central bank first if they have to decide on the closing of bank branches or ATM booths, but in case of emergency, the central bank is allowing the banks to make the decision and report it later to ensure safety of their employees and property,” he said.

Mr Krirk said he believed all commercial banks had understood well a need to take care of their employees and property and had a contingency plan to ensure their safety.

The deputy chief added the BoT also approved an extension of services by the coordination center tasked to address lending problems from April to the end of this year because many consumers continued  to complain with the center.

Mr Krirk said the center could serve as a channel to create proper understanding among people of how to seek loans and services from commercial banks. It is also a venue where people could file a complaint  about problems they have with financial institutions.

Should people have any loan problems, they could file their complaint or discuss with the center at telephone number 02-283-5900. (TNA)

Despite the fluctuation of Thai Baht, BOT Governor Tarisa Watanagase said the Central Bank had prepared means and measures to address the unstable value. She advised both exporters and importers to make themselves ready for any circumstances of Thai Baht trade in the future.

Dr. Tarisa also advised them to opt for a guarantee of currency exchange, and recommended them not to be confident in forecasts from dealers over Thai baht value in the futures.

She said the new package is additional to the previous one under which private companies are allowed by the BoT to invest in debt instruments and securities overseas.

Previously, Deputy Prime Minister Korbsak Sabhavasu suggested the strengthening of the baht against the US dollar be addressed through various measures.

He urged the central bank to revise the measure to control the capital outflow.

Mrs Tarisa said the baht had moved in the same direction with other currencies.

From the beginning of this year to the first quarter, the baht had appreciated 4 per cent against the US dollar while Indonesian rupiah had strengthened 16-17 per cent and South Korean won had risen 13-14 per cent.

In the second quarter, the baht had strengthened only by 0.06 per cent while other currencies had appreciated by an average of 2-4 per cent.

In consequence, she said the baht had moved in the medium level, and it had not caused Thailand to lose competitiveness.

She attributed the stronger baht to the trade surplus as imports reduced in a greater amount of exports.

Should the economy pick up, exports and imports would be balanced and the trade surplus would lessen, which could make the baht weaken.

Because this, private companies and investors must oversee risks because no one could forecast the direction of the baht. (TNA)

Earlier, Dr Virabongsa  blamed the BoT for its failure to manage the baht appropriately, which led to a continued appreciation of the currency that affected the country’s exports. He also indicated that the monetary policy could not be adopted to help stimulate the economy.

“I want to ask how improperly the central bank manages the baht. The bank has overseen the currency to ensure it moves in the same direction with other regional currencies.

“Don’t talk about the baht based on personal feeling. It must count on information. Also, the baht should neither be monitored on a daily basis nor be compared with the US dollar because the greenback tends to strengthen,” she said.

Mrs Tarisa said the baht must be considered based on currencies of trading partners.

By comparison with other currencies, the baht had strengthened only slightly. It did not make Thailand lose export competitiveness. The BoT chief affirmed the baht had strengthened because the country enjoyed a trade surplus and foreign capital had flowed into the Thai stock market.

“The baht has now appreciated to 33-34 to the US dollar from 35 early this year. We affirm the baht rise does not make Thailand lose competitiveness because it moved in the same direction with other currencies of our trading partners,” Mrs Tarisa said. (TNA)