The Ministry of Finance and the Bank of Thailand have been instructed to come up with urgent measures to reduce the volatility of the baht..
The instruction was made by Prime Minister Yingluck Shinawatra, who called a meeting of senior officials responsible for economic affairs on 8 May 2013 for a discussion on ways to tackle the appreciation of the baht.
Attending the meeting were Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong, Governor of the Bank of Thailand Prasarn Trairatvorakul, Budget Director of the Bureau of the Budget Voravidh Champeeratana, Secretary-General of the Office of the National Economic and Social Development Board Arkhom Termpittayapaisith, and Permanent Secretary for Finance Areepong Bhoocha-oom.
The meeting was told that the stronger baht since the beginning of 2013 has affected entrepreneurs in the export business, agro-industry, and food manufacturing. The baht rose to 29.62 per US dollar on average during the first four months of 2013. Although the baht is now more stable, all agencies concerned were urged not to be complacent but to closely monitor the situation.
The Bank of Thailand had earlier reported its four planned measures to tackle the stronger baht to the Ministry of Finance. It expressed concern that if the current monetary policy rate at 2.75 percent was reduced further, there would be more currency speculations by foreign investors in the Thai capital market.
The Ministry of Commerce told the Cabinet that, because of the stronger baht, exports in the first quarter of 2013 were on the decline. The Ministry of Agriculture and Cooperatives also reported that several agricultural products have been affected, as well. The Cabinet asked all relevant agencies to report the impacts to the Cabinet each week.
According to the Office of the National Economic and Social Development Board, Thailand’s economic growth in the first quarter of 2013 was satisfactory. The industrial sector exported more than 60 percent of its production. The forecast on the economic growth for the entire year still remains at 4.5-5.5 percent, with inflation of 2.5-3.5 percent. The Office of the National Economic and Social Development Board will officially announce Thailand’s economic performance and outlook on 20 May 2013.
Commerce Minister Boonsong Teriyapirom said that the Thai economic system depends chiefly on exports, by about 60 percent, or 250 billion US dollars. Because of the current volatility of the baht, the country’s export growth target, which was set at 8-9 percent in 2013, might not be achieved. The stronger baht would also lead to a drop in new overseas orders for Thai products. The gem and jewelry business, in particular, has seen a significant decline in turnover.
The Ministry of Finance and the Bank of Thailand are ready to work closely in seeking solutions to problems concerning the volatility of the baht.