Yingluck worried about strengthening baht
- Published: 23/04/2013 at 04:46 PM
- Online news:
Prime Minister Yingluck Shinawatra on Tuesday expressed concern over the Thai currency's continuing appreciation amid predictions it could strengthen to around 27 baht to the US dollar.
The premier said it is a major problem for the export sector and state agencies must address the issue and try their best to settle it.
Ms Yingluck said she had called a meeting of related ministries and agencies to discuss possible responses and had issued instructions that the baht's movement be closely watched.
She had also directed economic ministers, particularly Finance Minister Kittiratt Na-Ranong, to come up with proper measures to ease the difficulties the foreign exchange rate was causing manufacturers.
Asked whether the government would intervene to prevent the baht from getting stronger, Ms Yingluck said reporters should direct their questions at the central bank, which is duty bound to oversee the baht's value.
A man looks at a foreign exchange board in Bangkok on Jan 24, 2013. (Photo by Patipat Janthong)
Asked about Mr Kittiratt’s stated wish to dismiss Bank of Thailand governor Prasarn Trairatvorakul, the prime minister again gave no reply, saying reporters must direct their questions to the finance minister.
Ms Yingluck said she was confident that if all parties join forces the country would be able to handle the crisis caused by the strengthening of the baht.
Phanupong Nithiprapa, dean of economics at Thammasat University, said that if the currency continues to appreciate the BoT's monetary policy committee should call an urgent meeting to discuss the problem, rather than wait until its next regular meeting scheduled for May 29.
Mr Phanupong said the policy committee should consider lowering the repurchase rate to 2.50% from the current 2.75%, to slow the massive inflow of foreign direct investment.
This would ease the impact on the economy of the strengthening baht, while at the same time help spur economic growth.
If the central bank was concerned that a policy rate cut would lead to a problematic bubble in the property sector, it could implement necessary measures to prevent this occurring, such as controls on housing loans, the dean said.
Thanavath Phonvichai, director of the Economic and Business Forecasting Centre at the University of the Thai Chamber of Commerce, said manufacturers polled recently were worried by the baht’s persistent appreciation.
He said the poll sought the opinions of 600 manufacturers nationwide, from April 9 to19 when the baht was rallying at 28.80 to 29.10 baht to the dollar.
According to the poll’s results, 38.1% said the then-value of the baht was moderately suitable, but 33.3% of them said it was not suitable at all.
Some 42.1% of the respondents said the strengthening baht affected their business, particularly trade competitiveness, and 23.8% said it brought down their export volume and profit margin.
Slightly more than 30% of the polled manufacturers agreed a suitable level for the baht would be 30.48 baht to the dollar.
They could withstand the baht’s appreciation to the 29.18 baht level, they said. But if the Thai currency strengthened, to between 27 baht and 27.90 baht to the US dollar, 12.4% of them would have to lay off workers, while 9.8% would be forced to go out of business.
The manufacturers called on the government to come up with measures to curb the Thai currency's fluctuation and oversee its value to keep it between 29 baht and 30 baht to the US dollar.
They also said the Bank of Thailand should lower its fee on currency exchange transactions, help find financial sources to provide low rate soft loans for affected manufacturers, or cut the key policy rate and curb the massive influx of foreign direct investment.
Nattawut Saikuar (Photo by Apichart Jinakul)
Deputy Commerce Minister Nattawut Saikuar said a total of 831 companies reported to his ministry that they were ceasing business in March, of which 31 were export firms.
Altogether 98 companies shut down in the first quarter of the year - 42 in January, 25 in February and now 31 in March, Mr Nattawut said.
However, more than 900 new exporters registered with the ministry during the same period.
Of those that went out of business in March, 17 were garment and coffee seed exporters, six were exporters of metal and metal ores, six were exporters of consumer goods and two were exporters of frozen seafood, he said.
Mr Nattawut said that 19% of the firms that closed blamed the strengthening baht, while 39% shut down because their business was doing badly.
He did not say why the 42% remaining firms decided to stop doing businesses.
The minister said he had directed the Department of Business Development to closely follow the situation to assess the impact of the government's 300 baht daily wage policy on manufacturers and come up with necessary assistance measures.
In total, 909 new export firms registered with the ministry during the first quarter - outnumbering those that shut down by 10 to 1.
The number of new registered companies in the first quarter was up 20% on the same period last year to stand at 19,600, with a total capital of 97 billion baht, an increase of 15%.
The number of businesses that closed down over the period totalled 2,697, down 3%, with a total registered capital of 9.23 billion baht, a decline of 1%.
About the author
- Writer: Online Reporters
Position: Online Reporters