BOT ready to revIew its monetary polIcy

[Coss]

 

Will consider shift from inflation as priority if recovery is at serious risk

 

The Bank of Thailand stands ready to review its monetary stance if the economy signals a slowdown, as external factors are threats to both global recovery and the local economy.

 

BOT Deputy Governor Atchana Waiquamdee yesterday said an effective monetary policy needed to take the continuation of economic recovery into account and not focus solely on interest-rate hikes to tame inflation, which is now a primary concern for many central banks.

 

"Assuming the Thai economy sees no expansion, or nothing happens to cause stagnation, monetary policy needs to be reviewed," she said. "However, there is no sign of an economic slowdown in Thailand as yet, as seen from February's sound economic figures."

 

Economists are highlighting the European debt crisis, escalating violence in North Africa and the Middle East, as well as increasing oil prices as major risk factors to the global economy.

 

Atchana acknowledged that the euro-zone debt crisis might not end quickly.

 

The University of the Thai Chamber of Commerce said that although the Kingdom's export value should expand by 12-16.5 per cent this year, the growth path could be affected by oil prices and frequent natural disasters.

 

Higher oil prices are pushing up goods prices and overall inflation. The Bank of Thailand so far this year has raised the policy interest rate twice, by a combined 50 basis points to 2.5 per cent, in a bid to tame inflation. More rate hikes could come if growth continues uninterrupted by internal or external factors.

 

There is good news in the appreciation of the baht against the US dollar. Finance Minister Korn Chatikavanij said this would help soften Thailand's burden on oil imports as well as delay a hike in production costs, and hence in goods prices. But for the baht's strength, oil would have cost more, he said.

 

Meanwhile, to maintain the diesel price below Bt30 per litre, the Energy Policy Administration Committee yesterday approved another 50-satang-per-litre subsidy to Bt6.40.

 

Since the policy was implemented on December 17, the Oil Fund's aggregate subsidy has grown to Bt20.67 billion. The burden is likely to rise, as oil prices are expected to hit a record US$150 (Bt4,500) per barrel later this year, from $117 last week, due to supply interruptions in the Middle East and North Africa.

 

BP chief economist Christof Ruehl said in Perth yesterday that it always took years for disrupted supplies to return to normal after military conflict and unrest. Following the Gulf War, for example, it took two years for Kuwait to resume its oil operations.

 

Korn said an urgent meeting with Prime Minister Abhisit Vejjajiva was necessary to find measures to cope with high oil prices, as the Oil Fund is near to running a deficit. He said there should be a thorough review to decide whether the oil excise rate of Bt5 per litre should be reduced.

 

The Excise Department estimates that every Bt1 excise cut would shave about Bt20 billion off government revenue.

 

The Commerce Ministry is seeking a Bt1-billion budget to finance a caravan of cheap-goods fairs nationwide, particularly in the 10 flood-stricken provinces.

 

Under the Blue Flag scheme, mobile trucks would be dispatched to the target areas, offering goods priced 20-40 per cent lower than market levels, said Commerce Minister Porntiva Nakasai.

 

She said the three-month project, which could be kicked off after the Songkran festival, should initially cost Bt1 billion.

 

The minister added that the premier had approved the project in principle, but more details would be discussed this week.

 

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