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“Too good for its own good” – The Thai economy

Tanutam Thawan

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Bloomberg has written an opinion piece about the robust Thai economy, sharing its fears along with some pats on the back.

“Thailand really should let its hair down. The currency is strong and the current-account surplus is big versus the neighborhood, while there’s a lot of scope for fiscal expansion. The Bank of Thailand has been grudging in cutting interest rates, in contrast to the easing party under way not just in Asia but in emerging and developed markets the world over.”

The article recognises the Thai ‘lever pullers’ resistance to doing anything too drastic following all the lessons learned over the past two decades since the Thai economy led the rest of Asia down the rabbit hole which became known as the 1997 Asian Financial Crisis.

“But Thailand may have learned the lessons too well. Its policy settings look like they are primed for truly dire times – few predict a coming catastrophe – and insufficiently calibrated to prolong growth or mitigate a shallow recession.”

Whilst commentators and keyboard experts seem bemused by Thailand’s current position as a ‘safe haven’ for investors and currency players, the Thai government keep plodding along with a still-growing, if not sluggish, economy and a reluctance to drop the base rate of the Bank of Thailand any further to make the Baht less ‘interesting’.

The IMF (International Monetary Fund) wants more budget activism and appears to push back against hoarding reserves and the hefty current-account surplus.

“Many directors considered that Thailand’s external position remains substantially stronger than warranted by medium-term fundamentals and desirable policies.”

So far the Thai baht is up 7% against the USD, the next best performing regional currency, the Indonesian Rupiah, has advanced little more than 1% against the USD.

“Two decades ago, a perky currency would have been a great problem to have. Today, the baht’s strength masks an array of problems, some of them distinctly first world in nature. Inflation is virtually non-existent; consumer prices rose just 0.3% from a year earlier in September. Productivity is low and wages are high for the region.”

Read the rest of the Bloomberg article, and it’s suggested remedies to diffuse the Thai baht, HERE.

 

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