Chartchai Parasuk
Freelance economist
Chartchai Parasuk, PhD, is a freelance economist.
Demand destruction the new buzzword
On Feb 23, a day before Russia invaded Ukraine, the world crude oil price was US$90.60 (3,221 baht) per barrel. Russian oil supply disruption and demand recovery from Covid-19 dragged the crude oil price to almost $120 at the end of May, after the US and European central banks sent strong signals that they would rapidly increase interest rates to contain inflation, despite the cost of a further economic slowdown.
Fed's rate rises might have way to go yet
By the time this article is published, readers will know how much the US Fed funds rate has been raised for the fourth time this year. It does not really matter whether the rate is raised by 0.75% or 1% this time because the Fed will need to keep raising the rate (FFR) until it can effectively control inflation.
BoT can't afford to hold interest rates
Like all countries in the world, the Bank of Thailand (and Monetary Policy Committee, or MPC) believes they can run monetary policy independently based on local economic conditions.
City Hall needs a much larger budget
This article is a welcome gift to Bangkok's new governor, Chadchart Sittipunt.
How far should interest rate hikes go?
No doubt remains as to whether the Bank of Thailand will raise interest rates. The bank's governor has made it clear they must be raised to deter rising inflation, and that this must be done in a timely manner. Analysts have taken his speech as indicating a 25bp hike will be introduced at the upcoming Monetary Policy Committee (MPC) meeting scheduled for Aug 10.
In the end, economic theories prevail
I have made several dire predictions for the Thai economy this year such as high inflation, a liquidity crisis, interest rate hikes, bank collapses, a currency run, and, of course, an economic recession.
Spectre of 2023 global recession looms
In economics, there is no such thing as a surprise. Major economic events like rising inflation, interest rate hikes, currency depreciation, even economic recession can be detected as far as a year ahead.
Thai interest rate policy needs changing
On March 16, the Federal Open Market Committee (FOMC), the US equivalent of Thailand's Monetary Policy Committee, raised its policy interest rate (Fed Funds Rate) by 25 basis points from 0.00%-0.25% to 0.25%-0.50% to tame rising inflation.
Expect inflation to worsen, not lessen
The economic theory is clear. Inflation always precedes a recession. Investors also think similarly. A recent Market Live Poll conducted by Bloomberg shows that 15% of investors are expecting a US recession to begin in 2022, 48% in 2023, 21% in 2024 and 16% looking at 2025 or later. Deutsch Bank also believes the US economy could face a recession in 2023.
Yuan won't outrank dollar anytime soon
The issue of the Chinese yuan as a premier international currency has been around for quite some time. Right now, only 3% of international trade transaction is conducted in yuan and, correspondingly, central banks around the world keep only 3% of their international reserves in Yuan. To most, this is quite puzzling as China is the world's second-largest economy with a GDP portion of 13.04% of world GDP and is the world's largest exporter with a global market share of 14.7%.
