BoT to encourage overseas investment and capital flow liberalisation

BANGKOK, Jan 29 (TNA) – The Bank of Thailand (BoT) is set to issue next week added measures to encourage private-sector investment abroad and liberalisation of capital flows.

Delivering a policy statement in this week, BoT Governor Tarisa Watanagase said last year’s economic crisis was the world’s worst in 60 years. It had changed the global economic structure, resulting in a slower economic growth than before.

In this scenario, the economic mechanism needs to be adjusted to ensure sustained economic growth, so the central bank will give importance to policy implementation in three issues.

First, it will closely monitor the currency exchange rate to prevent it from being overly volatile and prepare a response to cope with the capital flow into Asia.

“Next week, the central bank will issue a measure to ease the capital flow by the private sector and facilitate money management. It is an additional measure issued to encourage the private sector to invest overseas,” she said.

Asked to comment on the greater role of the Chinese yuan in the global economic system, Mrs. Tarisa said the yuan would not yet be able to replace the US dollar because the greenback remains highly liquid.

Although hedge funds will prefer speculating on the yuan, they would not count on Thailand as a place to keep money for speculation on the Chinese currency.

She predicted that this year incomes earned from exports would reach US$10 billion, those from investment in debt instruments $1.5 billion, and those from investment in the capital market $1 billion.

The central bank would also adopt an eased monetary policy due to the economic recovery. She expected the economy this year would grow 3.3-5.3 per cent.

The relaxation of fiscal and monetary policy is rather sensitive and needs perfect timing.

Should the policy ease too quickly, it would negatively affect economic expansion, but if the interest rate is too low, it would fuel inflation and lead to an economic bubble.

The central bank will also encourage Thai financial institutions to lend to small- and medium-size business sector, which is considered a key economic base. The bank is confident the Small Business Credit Guarantee Corporation will be able to lend Bt30 billion within March.

Mrs Tarisa allowed that the country’s rising political temperature remains a key risk factor that needs to be monitored and tackled because it could discourage private investment and long-term economic recovery. (TNA)