Private sector urged to brace for increased financial volatility

BANGKOK, Jan 15 (TNA) – Thailand’s private sector should prepare for rising interest rates and increased fluctuation in the financial market in 2010, according to the Bank of Thailand (BoT).

Speaking at a seminar on “Economic Direction and Monetary Policy in 2010”, BoT Deputy Governor Bandid Nijathaworn said the global economy will continue recovering this year, which would contribute to Thailand’s economic growth.

Simultaneously, it would fuel the inflationary pressure, which could give the central bank less chance to adopt the low interest rate to stimulate the economy.

He said the BoT and the Monetary Policy Committee need to consider a perfect timing for easing the monetary policy or raising the policy interest rate.

They had to give an equal importance to boosting the economic recovery and maintaining the core inflation rate in the range of 0.5-3 per cent.

Mr Bandid said economies of major industrial countries would recover at a slower pace than would the Asian economies, resulting in the Asian countries facing an accelerating inflation rate.

Under the circumstances, more foreign capital will flow into Asia, making stock markets in the region rally and currencies including the Thai baht strengthen further.

Because of this, he suggested, the private sector brace for the financial volatility because it remained uncertain when major industrial countries would change the monetary policy and adjust the interest rate.

He said the global economy remained fragile and must be monitored because unemployment rates in the major industrial countries are still high.

In addition, the fiscal position of many countries remains weak as many commercial banks are facing huge bad debts. These factors constitute a grave constraint to the business performance and the economic recovery, said Mr Bandid. (TNA)