THE BANK OF THAILAND could turn on the stimulus tap, as risks are rising that the economy might not reach 1.5-per-cent growth this year, and that exports might even contract.
"We are watching closely. If economic growth continues at a low level, it may be necessary for additional monetary policy," BOT Governor Prasarn Trairatvorakul said yesterday.
In its most recent meeting, the central bank's Monetary Policy Committee (MPC) expressed concern over economic expansion, which remained weaker than expected. It decided to leave the policy interest rate at 2 per cent.
Easing monetary measures remain appropriate for the economy if it continues decelerating, and it is possible for the central bank to unleash additional monetary stimulus to prop up the economy, Prasarn said.
Fiscal policy is the key issue the BOT has been considering in deciding whether to adjust monetary policy and, recently, state budget disbursement has been slower than expected.
In late October, after fiscal 2015 began, the government planned to accelerate short-term disbursement. If the fiscal measures could not stimulate the economy, monetary stimulus might need to step in, Prasarn said.
However, he noted, monetary measures were not a magic pill for all problems, so it was more proper to employ fiscal stimulus.
In the past three to four years, although Thailand has confronted political problems or external impacts, it was a proper direction for increasing monetary accommodation, as that helped absorb shocks from external factors.
Since the second quarter of last year, the MPC has slashed the policy rate three times, from 2.75 per cent to 2.00 per cent.
In its surveys of business operators, the central bank has rarely heard about impacts from the rate cuts, which generally benefited business operators. Only the labour shortage and state assistance problems have been reported.
The economy, in the past three to four years, has faced uncertainties in growth, from both internal and external factors. In the first half of this year, Thailand saw political impacts drag its economy into negative-growth territory. The economy started recovering in the second quarter.
The central bank forecasts the economy expanding in the second half of this year, but it is expected to remain at risk of missing the 2014 growth target of 1.5 per cent.
Exports have also been picking up more slowly than expected mainly because of drops in the prices of rubber and rice, and structural problems involving electronics goods. This year may see exports shrink.
With Europe's economic slowdown and political conflicts with Russia, foreign-tourist arrivals are expected to come in at 25 million this year, against the target of 27 million.
This will leave Thailand dependent on domestic drivers, including investment and consumption, for growth.
However, the government is trying to accelerate investment this fiscal year and rush spending of the carry-over budget. It is also speeding up approval by the Board of Investment of projects to help boost the economy.
THE BANK OF THAILAND could turn on the stimulus tap, as risks are rising that the economy might not reach 1.5-per-cent growth this year, and that exports might even contract."We are watching closely. If economic growth continues at a low level, it may be necessary for additional monetary policy," BOT Governor Prasarn Trairatvorakul said yesterday.In its most recent meeting, the central bank's Monetary Policy Committee (MPC) expressed concern over economic expansion, which remained weaker than expected. It decided to leave the policy interest rate at 2 per cent.Easing monetary measures remain appropriate for the economy if it continues decelerating, and it is possible for the central bank to unleash additional monetary stimulus to prop up the economy, Prasarn said.Fiscal policy is the key issue the BOT has been considering in deciding whether to adjust monetary policy and, recently, state budget disbursement has been slower than expected.In late October, after fiscal 2015 began, the government planned to accelerate short-term disbursement. If the fiscal measures could not stimulate the economy, monetary stimulus might need to step in, Prasarn said.However, he noted, monetary measures were not a magic pill for all problems, so it was more proper to employ fiscal stimulus.In the past three to four years, although Thailand has confronted political problems or external impacts, it was a proper direction for increasing monetary accommodation, as that helped absorb shocks from external factors. Since the second quarter of last year, the MPC has slashed the policy rate three times, from 2.75 per cent to 2.00 per cent.In its surveys of business operators, the central bank has rarely heard about impacts from the rate cuts, which generally benefited business operators. Only the labour shortage and state assistance problems have been reported. The economy, in the past three to four years, has faced uncertainties in growth, from both internal and external factors. In the first half of this year, Thailand saw political impacts drag its economy into negative-growth territory. The economy started recovering in the second quarter.The central bank forecasts the economy expanding in the second half of this year, but it is expected to remain at risk of missing the 2014 growth target of 1.5 per cent.Exports have also been picking up more slowly than expected mainly because of drops in the prices of rubber and rice, and structural problems involving electronics goods. This year may see exports shrink.With Europe's economic slowdown and political conflicts with Russia, foreign-tourist arrivals are expected to come in at 25 million this year, against the target of 27 million. This will leave Thailand dependent on domestic drivers, including investment and consumption, for growth.However, the government is trying to accelerate investment this fiscal year and rush spending of the carry-over budget. It is also speeding up approval by the Board of Investment of projects to help boost the economy.
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