BoT chief: Looser monetary policy viable as GDP crutch

BoT chief: Looser monetary policy viable as GDP crutch

Bank of Thailand governor Veerathai Santiprabhob
Bank of Thailand governor Veerathai Santiprabhob

The Bank of Thailand still has monetary policy space to support the country's economic growth if necessary, its chief says.

Central bank governor Veerathai Santiprabhob's comments came a day after rate-setters cut the policy rate by a quarter-point to a historical low of 1%.

"The Bank of Thailand is the first central bank to take action because of the novel coronavirus outbreak," Mr Veerathai said. "Instead of waiting for clarity on the situation, the central bank wants to handle the situation immediately in case risks mount."

The central bank has reserved policy space for the past few years as economic growth averaged 3-4%.

Thailand is facing a triple whammy from the novel coronavirus spread, the delayed fiscal budget and severe drought. These factors will likely cause slower growth than previously forecast and below the potential rate this year, Mr Veerathai said, leading the central bank to take action immediately.

The Bank of Thailand needs several instruments and collaboration from other related parties to shore up the economy.

Apart from monetary policy, fiscal policy and assistance measures from financial institutions are necessary to maintain economic growth, Mr Veerathai said.

Amid heightening economic uncertainties, several research houses have predicted one more policy rate cut during the first half.

Mr Veerathai said the central bank asked commercial banks to provide liquidity support and to restructure debt to help customers.

The Bank of Thailand is requiring the Thai Bankers' Association to set up a special team overseeing debt restructuring for clients hurt by the ailing economy.

Some banks followed in the central bank's footsteps in cutting interest rates, while bond yields also fell as cheaper loans became available to the public and private sectors, Mr Veerathai said.

The governor said the baht has weakened against the US dollar since the start of the year because of negative headwinds, making it the region's weakest currency year-to-date. The local currency is still not moving in line with the country's economic fundamentals, and several instruments and cooperation from related parties are needed to remedy the situation.

The central bank has liberalised capital-flow movements by enacting several measures to rein in the baht. Other regulatory bodies, particularly the Finance Ministry and the Office of Insurance Commission, need to act towards easing regulations to aid fund outflows, Mr Veerathai said.

Lavaron Sangsnit, director-general of the Fiscal Policy Office, said Finance Minister Uttama Savanayana has approved raising the ceiling for foreign currency proceeds earned by exporters deposited overseas to US$1 million (31.01 million baht) from below $200,000 per bill of lading.

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