The BoT, however, is still resisting the pressure. It says it is closely monitoring the currency movements and relevant measures will be applied “at the appropriate time”.
The bank’s Assistant Governor, Chantawan Sucharitkul, pointed out that every monetary intervention has side effects and long-term consequences, compelling the central bank to consider carefully the impact of any intervention.
She pointed out that while exporters have been adversely affected, the strengthening baht has been a boon to Thai companies wanting to import heavy machinery and for those looking to acquire foreign businesses.
Naturally, there are no complaints from these people.
Ms Chantawan added that foreign capital inflows have boosted non-Thai investments in the government’s bond market by B140 billion in the first quarter – 60 per cent of that in long-term bonds averaging 4.7 years and 40 per cent in short-term bonds.
She insisted that Thailand’s policy interest rate, which is similar to that of neighbouring countries, is not the major attraction for capital inflow.
Investors simply find Thailand “outstanding” for its economic fundamentals and better credit compared with other countries in the region, she said.
The baht has appreciated by 6.28 per cent since early this year, from B30.55 to the US dollar to B28.82.
Ms Chantawan said Thailand’s economic fundamentals are strong compared to nearby countries.
By comparison, Indonesia’s currency has declined in value by 1 per cent since early this year, due to a budget deficit, while the Philippine peso weakened by 0.63 per cent, the South Korean won depreciated 4.28 per cent from the tension in the Korea peninsula, the Singapore dollar weakened by 1.44 per cent and the Malaysian ringgit dropped slightly by 0.16 per cent.
Unlike Finance Minister Kittirat Na-Ranong, who has repeatedly called for a policy rate reduction, and publicly ground his teeth over the bank’s resistance, Commerce Minister Boonsong Teriyapirom is taking a watch-and-see attitude, setting up a committee, which will include both civil servants and private sector figures, to keep an eye on developments in the export landscape. It will meet every quarter, or every month during the “unusual period,” until the Thai currency situation returns to normal.
Payungsak Chatsuthipol, chairman of the Federation of Thai Industries (FTI), said the private sector asked the Commerce Ministry to help boost border trade, currently worth B1 trillion or 10 per cent of gross domestic product (GDP), as a substitute for falling export revenue from the European and US markets.
The FTI, in a meeting with the central bank, the Bank of Thailand (BoT), on Tuesday, was due to propose five measures to deal with the strengthening baht, including a one-percentage-point reduction in the policy interest rate, and controls on foreign capital inflow, said Mr Payungsak.
He said Thai exporters have been severely battered by the strong baht, with exports falling 40 per cent for jewellery and 30 per cent for industrial products. The textiles, food and auto industries are also likely to record reduced purchase orders.
Pornsilp Patcharintanakul of the Thai Chamber of Commerce has called for similar measures, urging the BoT to reduce the policy interest rate by 0.25 points and calling for the government to levy tax on incoming capital, he said – a measure already adopted by Malaysia.
Prime Minister Yingluck Shinawatra told economic ministers meeting last week that measures should be taken to help exporters, and that government agencies should accelerate Thailand’s trade penetration into major markets including China, Indonesia, India, Myanmar and secondary markets including Russia, Brazil and Africa.
But supporters of the United Front for Democracy against Dictatorship (UDD – also known as the Red Shirts) have taken a typically hard line, calling for Mr Prasarn to resign.
In a letter to the governor they accused him of letting the currency appreciate to the point where the industrial sector was seriously affected.
One of the supporters of the resignation call claimed that the baht appreciation might lead to unemployment, result in farmers being unable to sell their rice and increase fertilizer prices.
– MCOT Online/NNT