Prasarn
Exporters join govt's pleas; baht hits 16-year high
The Bank of Thailand (BOT) is facing growing pressure to cut its policy rate, a move backed by both the government and exporters as a quick fix to the baht's continued appreciation, which is taking a toll on the export sector.
Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong surprised the audience at a debate at a charity event on Thursday night by saying he thinks about dismissing the Bank of Thailand governor on a daily basis.
"It's been on my mind. But when asked if I will do anything, I opt not to elaborate," he said, referring to the central bank's governor, Prasarn Trairatvorakul. Kittiratt firmly believes that a policy rate cut would slow currency inflows and the baht's appreciation along with it.
Prasarn chairs the BOT's Monetary Policy Committee, which is in charge of setting the policy rate.
At 8.18am yesterday, the baht hit a 16-year high of 28.71 per dollar, gaining 2.02 per cent from end-March, according to BOT data. At one point, it touched 28.68 to the dollar - a 6-per-cent increase from the end of last year. Month to date, the currency has gained 6.40 per cent against the Japanese yen, reaching 29.26 per 100 yen. It has appreciated by 0.17 per cent against the euro to 27.478.
Prasarn himself has conceded that the baht is advancing well above its fundamentals, but has not elaborated or mentioned any measures to contain the appreciation. On Thursday, he held a meeting with the prime minister and heads of economic government units. Prasarn said the agenda was mainly concerned with export targets, not exchange rates.
Thai Trade Representative president Olarn Chaipravat said concerned agencies need to urgently tackle the rise of the baht, which has gained about 6 per cent on the currencies of Thailand's main trading partners and competitors. The Chinese yuan has appreciated by just 2 per cent against the dollar, while the yen has depreciated by 20 per cent. Thailand urgently needs to curb the baht's value to ensure it is not stronger than Bt29 to the greenback to guarantee smooth export growth, he said.
"Too strong a baht will definitely cause Thailand to miss its export target of 8-9 per cent this year. Responsible agencies could halt the appreciation by intervening in the exchange rate, or cutting the policy interest rate," Olarn said.
He said the Thai policy interest rate is too high compared with those in other countries. Developed economies like Japan and the European Union have set their policy rates below 1 per cent. Rates in other countries are also much lower than Thailand's.
Payungsak Chartsutipol, chairman of the Federation of Thai Industries (FTI), said the BOT should cut the policy rate to create a balance for the import and export sectors. The baht should not be stronger than Bt30 to the greenback, he said.
He said the strong baht has hurt exporters, in particular small and medium-sized enterprises. Thai shipments this year will not achieve the target of 8-9 per cent, he predicted.
The FTI will call a meeting of its five committees - economic; trade and investment; small and medium-sized industries; industries; and international organisations - to brainstorm measures to alleviate the impact of the baht's rise on April 24.
Solutions proposed at the meeting will be submitted to the Commerce Ministry on April 26.
Isara Vongkulsolkij, chairman of the Board of Trade of Thailand and the Thai Chamber of Commerce, said the chamber on Thursday called for a meeting with trade associations to share ideas on alleviating the impact of the strong baht. Associations in the agricultural sector say they have been hardest hit by the problem. Commerce Minister Boonsong Teriyapirom said the ministry would hold a meeting with private-sector organisations including the FTI, the Board of Trade and the Thai Bankers Association to discuss the baht's strengthening and seek solutions on April 26.
The ministry is maintaining its export target at 8-9 per cent growth to US$250 billion-$260 billion (about Bt7.1 trillion-Bt7.4 trillion) this year.
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Article source: http://www.thethailandlinks.com/2013/04/20/pressure-grows-for-bot-to-lower-rate/
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