The minister emphasised that any measures taken to curb the value of the Thai baht will be part of a package and will not interfere with the natural mechanism of the market. He predicted that the Thai economy would grow by 3% this year and that the government would meet its budget targets.
The Thai finance minister in Hong Kong has revealed that his ministry is working with the Bank of Thailand on a range of measures to ‘rebalance’ the value of the Thai currency. However, in the course of an interview with Bloomberg, he stressed the government’s top economic priority remains the reform of the Thai economy by attracting massive inward investment.
Thailand’s finance minister attending the Hong Kong Asian Financial Forum this week gave an interview to Bloomberg in which he accepted the Bank of Thailand’s view that the baht needed to be rebalanced and was now valued beyond the level justified by the country’s economic fundamentals.
Uttama Savanayana acknowledged the urgency to act on this on the basis that 70% of the Thai economy is export-led.
However, the finance minister had a different emphasis and pointed to the priority of the Thai government being plans for economic reform which would require strong inward investment and financial support in the future.
Package of measures to rebalance the baht
Mr Uttama suggested that policymakers were currently reviewing the situation and would shortly announce a package of measures.
The finance minister suggested that one option being considered is to stimulate outward investment to reduce upward pressure on the baht.
He emphasised strongly, however, that the Thai government would undertake no action which would interfere with the natural mechanism of the markets.
Pointed to stimulation of outward investment
‘Potentially we can stimulate investment, outbound investment from Thailand that could be one, there could be other measures as well but I can assure you that nothing we could consider might interrupt the market mechanism,’ he told a Bloomberg reporter in a televised sit down interview at the prestigious forum event in Hong Kong.
The minister highlighted the other side of the coin of a higher valued baht which was an opportunity to purchase machinery and equipment for investment.
Firms relocating to Thailand already taking advantage of the strong baht to import machinery
Mr Uttama said that authorities are beginning to see firms relocating to the kingdom, taking advantage of the strong baht even as it constricts the export-dependent economy.
He described this as: ‘investment for new machinery and so on and also I guess in part due to the relocation of production bases into Thailand where they would start to invest in machinery and so on, so that is what we are seeing right now.’
Acknowledged difficulties faced by Thai exporters
However, he acknowledged the need to address what the Bank of Thailand now considers an overvalued currency.
‘That’s natural that Thai exports from Thailand would be affected by the currency but at the same time, having said that, there is also another side of the coin which is imports, the strength of the baht is also is also supportive of imports, technology imports machinery and so on so there are both sides but definitely on the export side, there is an impact there.’
Minster Uttama said the Finance Ministry was working with the Bank of Thailand to address the situation.
‘So there are measures I believe that we can introduce, sort of to rebalance the baht a little as per the Bank of Thailand’s view at the moment,’ he revealed.
Measures to relax repatriation rules for bond traders
The finance minister said that authorities were also looking at relaxing current regulations to allow traders in Thai denominated bonds to repatriate money back home rather than seeking permission on a case by case basis under current arrangements. However, he stressed that no decision has been taken.
Budget would come in on target
Mr Uttama said that the government’s own data showed an improvement on domestic consumption in the past few months in Thailand and predicted that the recently approved ฿3.2 trillion budget would come in as projected at 3% deficit for the year.
‘We are confident that we are going to hit it and it’s about in the range of 3% budget deficit which is still in line with what we’ve been anticipating,’ the minister revealed.
3% economic growth for 2020
When asked about the growth projection for 2020, Mr Uttama said it would be in the order of 3%.
When pressed if it could be more than 3%, he declined to go further saying that it would be of that order.
On Friday, the University of the Thai Chamber of Commerce, however, downgraded prospects for the year to 1.8% while the government’s own National Economic and Social Development Council current is currently projecting a growth rate of 2.8%.