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[ 2014-11-29 ]

Despite improvement in October, global risks still loom for economy, BOT warns

While noting that October's economic numbers signalled some improvement at home, the Bank of Thailand and the Fiscal Policy Office (FPO) have warned that global uncertainties will still pose a risk to the Thai economy.

Roong Mallikamas, senior director of the Macroeconomic and Monetary Policy Department at the BOT, said yesterday that the Thai economy last month showed broad-based improvement. Private consumption continued to recover thanks to an increase in confidence, public spending accelerated under government policy, exports expanded on the back of improvements in global demand, and tourists have started to come back, mostly from Asian countries.

She said merchandise exports in October expanded by 4.1 per cent (export value US$19.83 billion, or Bt651 billion) when compared with a year earlier, the most in 2014. This was driven by a recovery in external demand, especially from the United States and Asean countries, along with a temporary boost in exports to the euro zone ahead of the expiry of Thailand's Generalised System of Preferences tax privileges next year.

Exported products that mainly did well last month included automobiles, electronics, electrical appliances and petrochemical products. Roong said the export of petrochemical products was doing well because China has reduced its production in this field.

Thai exports to Cambodia, Laos, Myanmar and Vietnam have continued to expand at a good pace, while imports of raw materials, intermediate goods, and consumer goods have shown signs of gradual improvement in line with domestic and global demand, she said.

"The recovery of exports last month means that the downside risk that the sector will contract this year has lessened, and the BOT has maintained its prediction that export expansion will be flat," she said. 

Roong also observed that the tourism sector had continued to improve mainly through the return of visitors from Asia, particularly China, as concerns over the political situation in Thailand eased, visa fees were temporarily waived, and protests dragged on in Hong Kong. 

This was coupled with a momentary boost in visitors from Malaysia as private buses from that country were temporarily allowed to travel beyond Songkhla province until the end of October. 

However, signs of recovery in tourist arrivals from Europe, especially Russia, and the US remain unclear. Tourists from these places generally make long-term travel plans, and six months ago Thailand was still racked by political chaos. As well, the euro-area economies have remained sluggish, she said.

The number of inbound tourists in October was 2.2 million, an increase of 6.1 per cent when compared with the same month last year.

Roong said: "Global uncertainties in terms of differentiation of major economies' policies remain as potential risks to Thailand's money market. Not all foreign markets are looking good at the moment." 

Kritsada Jinavijarana, director-general of the FPO, said on Thursday that global economic uncertainty was still the No 1 concern for Thailand's economic recovery.

In a separate interview yesterday, BOT Governor Prasarn Trairatvorakul said the best way to cope with global economic and policy uncertainties was to make sure that Thailand's economic fundamentals in terms of interest rates, the exchange rate, credit quality, fiscal policy, and current account were strong and balanced. 

This would ensure good "immunity" against these uncertainties.

Roong said that if the Thai economy were strong and balanced, the expected fluctuations in global fund flows would not affect this country much, as other nations' sentiment towards Thailand would remain solid. 

She said the domestic economy remained stable with low unemployment rate (0.8 per cent), while inflation had decelerated on declining prices of fresh food and fuel. Last month, headline inflation decreased from 1.75 per cent in September to 1.48 per cent year on year.

Thailand also posted a current-account surplus in October of $2.6 billion on the improvement of the export sector. 

The baht has continued to depreciate from 31.93 per US dollar in August to 32.42 in September, and hitting 32.56 last month.