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16 September 2009

Political uncertainties cloud Thailand’s recovery prospects

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The Thai economy is showing signs of improvement, but its recovery remains fragile and vulnerable to political uncertainties, according to the Bank of Thailand (BoT).

The Thai News Agency quoted the the central bank governor Tarisa Watanagase as saying that while both the global and Thai economies had already bottomed out and begun to recover, it remained uncertain that the economic recovery would be sustained as internal and external risk factors needed to be monitored.

She said the simmering political turmoil arising from the anti-government rally on September 19 is a key internal risk factor to the Thai economic recovery.

Government spending, considered a main driving force for the economy, must be monitored to ensure it proceeds as planned. Efficient spending would help reduce shrinkage in the Thai economy.

As for the external risk factor, she said a close watch must be kept on the US and European economies.

Although the economies signalled recovery, it is uncertain that recovery could be sustained because the employment rate remains very high.

Regarding the monetary policy, Tarisa affirmed the central bank would not raise the policy interest rate in the near term as the inflation rate remains not worrying because they are still low.

Although central banks of many countries signalled an upward interest trend, she said, the BoT must closely monitor the inflation rate and the baht movement.

The baht was not volatile although it moved in the same direction with other regional currencies, she said, adding that the BoT monitored the situation and found nothing unusual about the capital inflow and outflow.



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