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Thai baht may need another ‘haircut’ by the Bank of Thailand before the end of 2019

The Thaiger & The Nation

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Thai baht may need another ‘haircut’ by the Bank of Thailand before the end of 2019 | The Thaiger
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Wednesday’s rate cut by the Bank of Thailand has not succeeded in reining in the surging baht, raising the prospect of another interest rate cut by 0.25 of a percentage point before the year-end.

While the central bank’s statement on the policy rate reduction didn’t mention the strength of the baht, economists suspect the baht’s strength and its impact on the Thai economy was a key reason for the Monetary Policy Committee’s decision. Yesterday they lowered the key interest rate by 0.25 percentage point – from 1.75% to 1.50%.

Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre says the Central Bank would have taken the sluggish economic growth into account.

“The baht has appreciated by 5.5% in 2019 when compared to neighbouring currencies, and the economic impact of the baht’s strength are starting to show in the country’s poor export performance”.

The Economic Intelligence Centre expects the BOT to reduce interest rate once more in 2019 by 0.25%, taking down the policy interest rate to 1.25% due to economic factors such as the impacts of the US-China trade war which has escalated to a currency war.

The baht was valued at 30.77 baht to the US dollar on August 7 after the interest rate cut, weakening by only 0.01 from 0.76 baht per US dollar on August 6.

The effectiveness of the central bank’s past measures to curb the strengthening baht has been unclear, said Tim Leelahaphan, an economist with Standard Chartered Bank.

On July 12, the BOT reduced the limits for outstanding balances of non-resident baht accounts and non-resident baht accounts for securities from 300 million to 200 million baht per non-resident.

Market analysts saw this announcement as the central bank’s attempt to reduce speculative capital inflows into Thailand’s economy.

Since then, the baht has appreciated slightly from 30.81 to 30.77 baht per US dollar.

Economists suggest that the key reason for the baht’s strength is largely unaffected by the BOT’s measures, as Thailand’s current account surplus, valued at 6% of GDP, leads to a perception among foreign investors of the country being a “safe haven” as an investment destination.

SOURCE: The Nation

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Business

No role for Transport Ministry in Thai Airways rehab plan

May Taylor

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No role for Transport Ministry in Thai Airways rehab plan | The Thaiger
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After initially insisting on having a say in the management of the rehabilitation plan for the beleaguered Thai Airways, the Ministry of Transport has conceded that, with its holding in the airline reduced to less than 50%, it no longer has any jurisdiction over what is now a listed public company.

Deputy Transport Minister Thaworn Senneam says the struggling carrier is no longer a state organisation under its control and administration of the court-approved rehabilitation plan now sits with the Finance Ministry.

Thai PBS World reports that both ministries had clashed over who would oversee the plan as, until filing for bankruptcy protection, the airline was both a listed public company with the Finance Ministry as its largest shareholder, and a state enterprise under the Transport Ministry.

The Transport Ministry had hoped to recommend 4 people as members of a “super board” that would oversee the administration of the airline’s rehabilitation plan, with other members to be nominated by the Finance Ministry.

The jockeying for position of the ‘super board’ has already begun with prominent names publicly putting themselves forward.

SOURCE: Thai PBS World

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Economy

Thailand’s economic forecast among Asia’s worst: central bank governor to step down

Jack Burton

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Thailand’s economic forecast among Asia’s worst: central bank governor to step down | The Thaiger
PHOTO: Bank of Thailand Governor Veerathai Santiprabhob - Chiang Rai Times

The governor of the Bank of Thailand will step down when his term ends in September. Veerathai Santiprabhob announced yesterday that he has decided against seeking a second 5 year term for “family reasons.” His departure comes as Thailand sees its economy contracting as much as 6% this year, mostly as a result of the impacts of lockdown provisions to protect citizens from the coronavirus, including closing the borders. Thailand’s economy is among the worst in Asia as Covid-19 has shattered its vital tourist sector.

Last week, the head of the BoT’s selection committee said said the application period for the next chief will run for 15 business days, from today to June 16, and the shortlist of candidates will be announced by July 2. The committee will meet on June 18 to compile the list of applicants, who will each present their vision for the central bank in late June. The candidates will not be announced until the selection process is finished, and if there is only one, or no candidates, the application period will be extended.

With the bleak economic outlook due to the the Covid-19 pandemic, the next BoT governor will face a challenging task.

Thailand’s gross domestic product is expected to shrink 5%-6% in 2020, according to the National Economic and Social Development Council. Yesterday’s estimate is “based on a limited outbreak in the second quarter,” a spokesman told journalists, adding that “the situation is still hard to predict.”

The new projection follows data showing GDP shrank 1.8% in the first quarter from a year ago, the first contraction since 2014. That was lower than the median estimate for a decline of 3.9% in a Bloomberg survey of economists and compares with revised growth of 1.5% in the fourth quarter.

Thailand relies heavily on tourism and trade, both of which have taken a severe blow as countries around the world imposed restrictions to contain the virus. Official data show a 74.6% plunge in tourist arrivals in March compared to last year.

“We don’t really see the full impact in this quarter yet. The worst is coming in the second quarter, and most of the population will be affected.”

SOURCES: Chiang Rai Times

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Events

Thai Fruit Golden Month festivals to be held in 8 Chinese cities

Jack Burton

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Thai Fruit Golden Month festivals to be held in 8 Chinese cities | The Thaiger
PHOTO: Chiang Mai CityLife

8 Chinese cities will host Thailand Fruit Golden Months Festivals as local governments there begin easing lockdown measures and travel restrictions. The director-general of the Department of International Trade Promotion made the announcement yesterday, saying the the festivals will promote Thai fruit exports around China.

“The campaign aims to increase the export of durian, mangosteen, longan, mango, rose apple, coconut, pomelo and banana. China will host the festivals from May to July in Shanghai, Qingdao, Nanning, Chengdu, Chongqing, Xian, Xiamen and Kunming.”

“For offline activities, sales booths will be set up at leading department stores in each city. As for online activities, the department and the local authorities will jointly host online business matching from May onwards to invite Chinese retailers to order Thai fruits online to sell in their stores as well as hold promotional campaigns with Chinese mobile applications, like Geso and Hema, to increase sales.”

“The department will also promote Thai fruits in other markets, such as Singapore, Myanmar and Laos in a similar manner once the local governments ease lockdown measures.”

In April, at the height of the Covid-19 pandemic, China opened 2 border gates in its southern Guangxi province to allow imports of Thai fruits from the Vietnamese side. Chinese are big importers of Thai fruit, especially Thai-grown durian.

SOURCE: Nation Thailand

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