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IMF: Thailand economy steady despite political tremors


June 19, 2008

IMF: Thailand economy steady despite political tremors
Thailand's economy is resilient despite domestic political uncertainty and global financial market turmoil, Reuters quoted the International Monetary Fund as saying Wednesday.

Thai authorities should monitor signs of rising inflation closely and stand ready to adjust interest rates if necessary, but the Bank of Thailand's policy of keeping interest rates on hold is appropriate, the IMF said in a statement on the conclusion of an Article IV consultation.

"Maintaining the credibility of the inflation-targeting framework should remain a high priority," the IMF said.

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The IMF projects an average 3.5 percent rise in Thailand's headline Consumer Price Index in 2008. The Thai economy grew at a pace of 4.75 percent in 2007, and is projected to expand by 5.3 percent in 2008.

Thailand's managed-float exchange-rate system has served the country well, the IMF said. The institution cautioned that use of exchange market intervention should be "limited."

Use of exchange-rate hedging by exporters to manage foreign currency exposure will help smooth a transition to greater exchange-rate flexibility, the IMF said.

"Thailand's external competitiveness remains intact, owing to productivity gains and successful efforts to diversify Thailand's export markets," the IMF said.

Domestic demand is expected to be the main engine of growth in 2008 as contributions from exports slow due to weakening demand from some of Thailand's trading partners, the IMF said.

IMF directors said they back a decision not to put in place limitations on foreign ownership in some business sectors.

The government of Prime Minister Samak Sundaravej is under pressure over a rise in the cost of living and political unrest, and the capital has been bracing in recent days for a new round of anti-government demonstrations. The Thai military removed prime minister Thaksin Shinawatra in a coup less than two years ago.

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