ASEAN KEY DESTINATIONS
Thailand prepares action plan to deal with impact of EU crisis
After a meeting chaired yesterday by Prime Minister Yingluck Shinawatra, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said that despite a clearer solution emerging from the EU summit, the euro zone crisis would remain heated for some time, now that Slovakia has become the sixth euro country to seek a bail-out.
The six measures arising from the economic ministers' meeting are: Maintaining macroeconomic strengths: While the baht has weakened to a level satisfactory to exporters, the policy interest rate is also at a satisfactory level in light of moderate inflation. On oil prices, the Oil Fund is still capable of intervening in the market, despite its negative cash flow of 16 billion baht (US$507 million).
Speeding up budget disbursement: At least 75 per cent of the 2012 budget (running through to September 30) will be disbursed, against 74 per cent in the previous fiscal year.
Seeking new markets for exporters: This would help replace diminishing demand from Europe.
Assisting labour: Training sessions by the Labour and Industry ministries should be a must for new graduates.
Increasing tourism income: The reopening of Don Mueang Airport, starting with a soft opening next month, should play a part in increasing the number of international arrivals.
Providing assistance to specific industries: The textile/garment, jewellery and electronics industries have been hit hard by the euro-zone crisis. The Export and Import Bank of Thailand has been assigned to extend liquidity worth 100 billion baht ($3.17 billion), aside from the export credit insurance facility worth 40 billion baht ($1.26 billion).
Economic ministers also see the need to support the prices of crops such as para rubber, which have only slowly crept up despite an increase in oil prices.
Kittiratt also said the political impasse in Thailand could affect the government's economic policies and erode the country's image.
Earlier, he said the Kingdom had enough ammunition to ward off negative impacts. He also envisaged a stock support fund, in case of a slump in the Stock Exchange of Thailand (SET).
Last week, EU leaders agreed in principle to allow the grouping's bail-out fund to buy bonds on the secondary market to drive down countries' borrowing costs if they comply with EU economic recommendations, and to create a banking regulator under the European Central Bank (ECB) with the power to rescue banks directly.
The agreements, viewed by many as a major climb-down by Germany, brought euphoria to global investors.
After days of advances, the SET Index yesterday eased by 3.92 points or 0.33 per cent to close at 1,194.15.
In its third-quarter investment focus, HSBC is overweight on Thailand, along with China and Taiwan. Thai shares are expected to rise further thanks to supportive monetary policy, expectations of growth surprises, abating political risks and valuations that support earnings growth of listed companies, it said.
SET turnover yesterday exceeded 30 billion baht ($951 million) for the first time in days. In the three trading days so far this month, foreigners remained net-buyers with a net-buy position of 1.25 billion baht ($39 million) but yesterday their sales exceeded purchases by 2.2 billion baht ($69 million).
While praising European leaders for the agreements reached last week, Standard & Poor's Ratings Services also foresees some associated risks.
In an article yesterday, the rating agency said some relief could be in sight for sovereigns in the European Economic and Monetary Union (euro zone) as a result of the agreements.
"In our view, these agreements could begin to stabilise the euro zone and staunch any further weakening of sovereign creditworthiness," it said.
"Measures that stabilise cross-border capital flows are now complementing fiscal austerity programmes."
Yet S&P believes the risks associated with implementing these measures are significant, and it is unclear whether policy-makers will be able to build on the agreements.
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