ASEAN KEY DESTINATIONS
Inflows to Thailand will not lessen
"Foreign capital inflows are here to stay," said M.R. Pridiyathorn Devakula, former central bank governor.
"The Thai government should introduce [an additional] tax on foreign capital inflows, largely in the bond market, to help stabilise the baht and maintain the competitiveness of the export sector."
Speaking at a seminar on "Risks to the Thai Economy and Economic Growth in 2011", the former finance minister cited a 6 percent Brazilian tax on foreign capital inflows that curbed the influx.
He said foreign capital inflows of as much as US$30 billion flooded into Thailand from June to September, equivalent to what was seen in the whole year in 2008 and 2009.
"I have never seen such massive foreign capital inflows in the past five years," he said, warning that inflows were likely to soar because the EU and the US are expected to extend their monetary easing to spur economic growth.
M.R. Pridiyathorn forecast the US interest rate would be cut to zero in the near future from 0.25% currently, generating a huge pool of liquidity in global markets that was increasingly being shifted to Asia in search of higher yields.
"Prime Minister Abhisit Vejjajiva is probably aware of this threat, but he may not realise how deep the problem is and its impact on the Thai private sector," he said.
The Thai baht has gained the most among currencies in the region except Japan, increasing 10.5 percent compared to 10 percent gains for the Singapore dollar and Malaysian ringgit, 6 percent for the Philippine peso, 4 percent for the Taiwanese dollar, 2 percent for China's yuan and 0.4 percent gains of the South Korean won.
The inflows to the Thai stock market also sent the index soaring by 30 percent to almost 1,000 points in four months.
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