Governor says BoT poised to handle baht volatility
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Governor says BoT poised to handle baht volatility

Bank of Thailand governor Sethaput Suthiwartnarueput (BOT photo)
Bank of Thailand governor Sethaput Suthiwartnarueput (BOT photo)

The Bank of Thailand is ready to handle baht volatility if fluctuations exceed the country's economic fundamentals, says the central bank's chief.

The baht has become more volatile, depreciating by 9% past 37 to the US dollar, said Bank of Thailand governor Sethaput Suthiwartnarueput at a seminar on Wednesday on Thailand's economic health hosted by the Nation Group.

"The bank is monitoring the movement of the baht and is ready to take action if there is unusually volatile movement to avoid adjustments in the real economy," Mr Sethaput said.

The baht is more volatile mainly because of external factors, including expectations of more aggressive US interest rate hikes and deteriorating risk sentiment in emerging Asian markets after China's yuan fell below 7 per dollar, he said.

Thailand's economy has high correlation with China's economy in the context of regional countries, said Mr Sethaput.

A factor specific to Thailand is falling gold prices, which are at the lowest in seven months, he said. As a result, Thai gold traders are more active compared with their peers, said Mr Sethaput.

His remarks on the baht come after Mr Sethaput's meeting with Prime Minister Srettha Thavisin on Monday, the first of their monthly discussions to reconcile any differences between fiscal and monetary policy directions.

"Differing views do not mean a conflict, and I look forward to smooth engagement with the government," Mr Sethaput said.

Given its role, the central bank should have independence on monetary policy management to maintain sustainable economic growth, medium-term price stability and financial system stability, he said.

Mr Sethaput said he was invited by the government to participate in the Digital Wallet Committee, the government's flagship stimulus measure. He said he will join the first committee meeting on Monday, which should be a good chance to share information and talk with other members.

The central bank believes the country's economic recovery is intact, driven by tourism and private consumption.

Inflation is expected to remain within the bank's target range of 1-3% over the long term.

The country's economic stability is solid thanks to strong international reserves of US$245 billion, ranking among the top 11 countries globally.

However, public debt is 62% of GDP, higher than 38% for Indonesia, 49% for South Korea and 63% for Malaysia.

Although the central bank is not concerned about short-term growth, it is concerned about long-term expansion and structural problems. As a result, cutting unnecessary regulations and regulatory impact assessment would improve the ease of doing business in Thailand, according to the regulator.

Mr Sethaput said regulatory development would resolve structural problems, attract private investment and foreign direct investment (FDI), and sustain economic growth over the long run.

For instance, he said Indonesia enacted the Omnibus Law in 2020, which boosted FDI, spurred economic growth and improved the ease of doing business while creating jobs.

Thailand continues to have a strong relationship with several advanced economies, particularly the US, China and Japan, said Mr Sethaput.

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