Capital will flow to the Thai financial markets if the local economy shows signs of healthier growth in the second half, says Kirida Bhaopichitr, the World Bank's senior economist for Thailand.
"Looking at the long-term trend, there's no other attractive destination for investment other than markets in East Asia, since foreign investors still view emerging markets as a source of high investment returns and Thailand is one of them," she said.
How much benefit Thailand can reap from capital inflows is another issue that needs further assessment.
In Ms Kirida's view, if the US Federal Reserve tapers its monthly asset purchases by less than expected, it will help to bring foreign investors back to the Thai market.
Slower economic growth of 2.8% year-on-year in the second quarter, down from the first quarter's 5.3% growth, and renewed concerns over Fed curbs have prompted a fresh round of fund repatriation from the Thai equity and bond markets.
The baht sank to a three-year low on Thursday, passing 32 to the US dollar.
The benchmark Stock Exchange of Thailand index yesterday sank to its lowest close since last Dec 7, down 1% at 1,338.13 points in moderate trade worth 46 billion baht.
The gauge has lost more than 8% in the past seven trading days.
Ms Kirida said the World Bank will next month revise its full-year forecast for Thailand's economic growth after a string of disappointing data in the first half.
Exports will be the main driver of economic growth in the second half, as signs have emerged of a global recovery, she said.
About the author
- Writer: Pathom Sangwongwanich
Position: Business Reporter