By Linda Khoo Hui Li
BANGKOK, Dec 2 (Bernama) — The Bank of Thailand’s (BoT) Monetary Policy Committee (MPC) has expressed concern over the rapid appreciation of the baht and will consider necessary measures to ensure the exchange rate movements will not be an obstacle to economic recovery.
According to minutes of its policy meeting on Nov 18 published Wednesday, the committee would closely monitor developments in foreign exchange markets and capital flows as well as consider the necessity of implementing additional appropriate measures.
The baht traded at 30.22 per U.S dollar at 2.45 pm (local time) after hitting a more than 10-month high of 30.13 on Nov 16.
On Nov 18, MPC unanimously voted to maintain the benchmark interest rate at a record low of 0.5 per cent for a fourth straight meeting to preserve the limited policy space and act at the appropriate and most effective time.
It said the baht faced short-term challenges from capital inflows to emerging markets (EMs), including Thailand, due to continued monetary policy easing in many countries as well as risk-on sentiment in the global financial markets.
The committee assessed that although the potential benefits of positive news on the COVID-19 vaccine and economic policies of the United States president-elect had yet to be realised, capital inflows resulted in the baht appreciation that could weigh on the economic recovery in the period ahead.
“In addition, long-term structural challenges of low investment which caused high and persistent current account surplus, together with the home bias behaviour of Thai investors would continuously add pressures for the baht to appreciate.
“The committee thus deemed appropriate to consider the necessity of implementing additional appropriate measures for both the short and long terms,” it said.
The BoT will hold a briefing on Dec 9 to unveil additional measures to contain the baht after announcing a series of steps last month.
Meanwhile, the committee said political uncertainties which could affect consumer and investor confidence and progress of protocols for admitting foreign tourists, as well as progress on the COVID-19 vaccine, could pose risks to the Thai economy.
It said heightened vulnerabilities in financial positions of households and businesses following the phase-out of the supporting measures also posed challenges to the economy.
Since mid-July, anti-government protesters have staged demonstrations in Bangkok demanding for political change, including the resignation of Prime Minister General Prayuth Chan o-cha and dissolution of Parliament, rewriting of the Constitution and bringing reform to the monarchy.
Thailand’s economy contracted at a slower pace in the third quarter (Q3) of this year as a result of improvements in total exports of goods and services, private investment and private final consumption expenditure.
Data released today by state planning agency, National Economic and Social Development Council showed that the country’s gross domestic product (GDP) shrank by 6.4 per cent, recovering from a fall of 12.1 in Q2, the sharpest fall in more than two decades.
BoT forecasts the economy to shrink 7.8 per cent this year compared to the previous forecast of 8.1 per cent.
— BERNAMA