CURRENCIES
Business leaders are calling on authorities to keep closely monitoring the baht, saying the currency could resume appreciation amid continuing capital inflows and massive liquidity globally.
Although the baht has weakened recently, the Federation of Thai Industries (FTI) yesterday said the biggest concern remains volatility and keeping the baht relatively stable to its peers in the region.
"We're still unsure whether the baht can regain its strength after easing close to 30 to the US dollar again," said FTI chairman Payungsak Chartsutthipol.
"The Thai economy remains sound, and several countries are injecting liquidity into it such as Japan. Capital inflow will continue."
Together with other business groups, the FTI recently met with the Bank of Thailand and Prime Minister Yingluck Shinawatra to ask for urgent measures to curb the strength of the baht, which hit a 16-year high of 28.55 last month.
The private sector proposed cutting the policy interest rate and imposing short-term action to curb speculative inflows.
"I think the central bank and the Monetary Policy Committee have policies to rein in a rising baht. Some measures need to be imposed in advance before the currency regains its strength as well as to prevent arbitrage," said Mr Payungsak.
The FTI cited baht appreciation as the major factor causing the Thai Industries Sentiment Index to fall for the fourth straight month in April to 92.9 points from 93.5 in March. The survey of 1,074 companies across 42 industries found quick appreciation directly affected their exports.
Surapong Paisitpatanapong, spokesman for the FTI's automotive industry club, said the sector's export value will drop by 28 billion baht if the baht gains one baht against the greenback and 56 billion for a jump of two baht.
The automotive sector set an export goal of US$28 billion this year. Last month, the industry produced 170,488 units, up by 17.4% year-on-year, with 40% of the output exported.
In the first four months of this year, 355,126 units were shipped abroad, up by nearly 40% from a year earlier.
About 1.1 million vehicles will be exported this year out of an estimated total production of 2.5 million.
Industry Minister Prasert Boonchaisuk said risk diversification is one measure for small and medium-sized enterprises to mitigate the impacts of the strong baht as well as investing in neighbouring countries or other countries in the region such as China and India.
The Board of Investment can act as a management consultant for companies interested in expanding abroad, and the ministry also plans to ratify the subsidised loan programme, which is in line for cabinet approval, he said.
The programme allows manufacturers to obtain loans of less than 25 million baht from banks, with the ministry subsidising a 5% interest rate with a maturity of five years or less.
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Article source: http://www.thethailandlinks.com/2013/05/19/fti-nervous-about-volatility/
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