Kittiratt Shift on Rates Eases Pressure on Thai Central BankYe Xie
Thailand’s Finance Minister Kittiratt Na-Ranong said he can accept higher-than-desirable interest rates set by the central bank as long as the currency remains near current levels.
The Bank of Thailand kept its benchmark interest rate at 2.5 percent for a third meeting on Oct. 16, after cutting it a quarter percentage point in May. Kittiratt had complained that interest rates were too high, attracting speculative capital, strengthening the currency and weakening the economy.
“The policy rate is not as low as I wish, but it’s lower and stable,” Kittiratt, 55, said in an interview in New York on Oct. 25. “I don’t think it’s the end of the world. I can accept that.”
The shift in tone came after the baht dropped about 8 percent since reaching a 16-year high in April on concern the potential withdrawal of U.S. monetary stimulus may drain capital from developing countries.
The baht fell 0.3 percent to 31.095 per dollar as of 9:22 a.m. in Bangkok, according to data compiled by Bloomberg. The currency has declined 1.6 percent this year. At current levels, the baht is appropriate for exporters to grow, Kittiratt said.
“Business people, exporters and importers seem to be performing O.K. at these levels,” Kittiratt said. “If it fluctuates too much in short periods without good reasons, I’ll step in and express my opinion again.”
The central bank last week pared its estimate for gross domestic product growth this year to 3.7 percent, compared with a July projection of 4 percent, and said exports may expand 1 percent, down from an earlier forecast of 4 percent.
Kittiratt said he is keeping his focus on improving the country’s long-term productivity.
The minister urged the parliament to speed up the approval of budget disbursements as plans to spend 2 trillion baht ($64 billion) on infrastructure and 350 billion baht on water-management projects have stalled.
The projects are part of Prime Minister Yingluck Shinawatra’s efforts to boost private investment and government spending in a bid to reduce Thailand’s reliance on exports for growth.
“We are in a very important transition stage,” Kittiratt said. “If we don’t transform ourselves and still stick to these low value-added industries, we’ll be in trouble.”