IMF praises stimulus

IMF praises stimulus

Lender urges proper use of policy space

Bank of Thailand governor Veerathai Santiprabhob with IMF managing director Kristalina Georgieva at their joint conference.
Bank of Thailand governor Veerathai Santiprabhob with IMF managing director Kristalina Georgieva at their joint conference.

Now is a good time for Thailand to implement stimulus measures to rev up its economic growth momentum, weighed down by the global slowdown, given the availability of policy space, says the IMF chief.

The multinational lender suggests policymakers globally use policy space in an appropriate manner, with each country fighting the economic downturn, said managing director Kristalina Georgieva.

Stimulus packages should help boost investment, manufacturing and consumption, which in turn could revive the decelerating economy, she said.

"In general, people remain confident, so the implementation of stimulus measures would benefit the economy," Mrs Georgieva said. "A dearth of available tools could create greater risks."

Such moves should be done prudently and at a suitable time for each nation, she said.

Countries also need to preserve some policy ammunition because uncertainties lie ahead, Mrs Georgieva said.

The IMF's executive directors said in a recent report about an Article IV consultation in Thailand that they have encouraged an expansionary policy mix to support domestic demand, plus structural reforms to promote inclusive and sustainable growth.

"However, the Bank of Thailand should keep its powder dry in managing monetary policy amid the synchronised slowdown," Mrs Georgieva said, refusing to comment on what the Monetary Policy Committee should do at today's scheduled meeting.

She said Thailand faces unique challenges on the global and domestic fronts.

On the global front, the trade dispute between the US and China poses headwinds to growth, while prolonged low interest rates in advanced economies constrains finance.

On the domestic front, Thailand faces challenges from perennially low inflation, high household debt, an ageing society and the need for infrastructure development.

Given the impact of trade tensions and the global slowdown, the IMF has revised down Thai GDP growth to 2.9% this year and 3% next year from 3.5% previously predicted for both 2019 and 2020.

Mrs Georgieva said the global economy is still growing, albeit at a slower pace because of several uncertainties worldwide, including US-China trade tensions, Brexit, geopolitical tensions and climate change.

Some 90% of the world economy is decelerating, she said.

The IMF forecasts global economic growth for 2020 of 3.5%, up from 3% estimated for this year.

With the Sino-US trade spat, the cumulative effect of trade conflicts could mean a loss of US$700 billion by 2020, or about 0.8% of the world's GDP. But the situation is expected to improve because of the phase-one trade agreement between the two giant economies.

Mrs Georgieva said the IMF slashed its Asean economic growth forecast for this year to 4.6% from an earlier estimate of 5% and forecasts growth for 2020 of 4.8%, though Asean's economy still has growth potential.

Asean GDP represents 10% of global GDP, similar to the world's key economies, with the US and the EU making up 12% and 11%, respectively.

Moreover, global collective action is needed to cope with the synchronised slowdown, the same practice used during the world economic crisis in 2007-08, Mrs Georgieva said.

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