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Bank of Thailand warns against 'prolonged' political activism
Publication Date : 06-08-2013
The Bank of Thailand is keeping a close watch on the political situation, which if prolonged could affect the country's credibility on both economic and investment issues.
"I admit that the current political situation is quite a concern," BOT Governor Prasarn Trairatvorakul said.
"Personally I have no in-depth information about the issue, which should be followed closely. If the situation is settled quickly, the impact to economic and investment credibility will be limited. However, if the political problem is prolonged, the impact will be greater.
"What I expect is that all stakeholders will give priority concern to mutual benefits. There are many other things we have to accomplish and we should not construct any obstacles for ourselves."
Prasarn said the devaluation of baht over the past several days was partly a result of the country's internal issues, especially political problems. However, the impact is expected to be short-term. The movement of capital is currently in balance. The financial markets view the situation in Thailand as not a sensitive matter.
He said the direction of baht in the second half should depend on the global economy, which is still in a period of high uncertainty even though there are some indications of recovery in major countries. Those recoveries, however, are not at full steam. The currency will also be affected by internal factors, especially political issues.
Prasarn said that overall, local financial institutions, especially commercial banks, had performed quite strongly over the past two years as regulated by the BOT to conduct business with care. They have higher loan-loss provisions as encouraged by many credit-rating agencies.
The SET Index yesterday closed at 1,424.31, up 0.24 per cent.
Finance Ministry permanent secretary Areepong Bhoocha-oom said the present political unrest would affect the economy in the short term but in the long term it would remain stable. He added that gross domestic product had continued growing so far in the second half.
The ministry will propose to the Cabinet today some economic stimulus measures, he said.
The People's Army to Overthrow the Thaksin Regime is staging an anti-government rally in Bangkok's Lumpini Park. The movement's leaders said the rally would remove the government of Prime Minister Yingluck Shinawatra from power within seven days.
Chartsiri Sophonpanich, president of Bangkok Bank and chairman of the Thai Bankers' Association, said he hoped the rally would end soon, as the country needed stability. He believes the political situation is short-term and will not affect the banking industry's loan growth.
Bualuang Securities president Pichet Sithi-Amnuai said retail investors were slowing their investment in the Stock Exchange of Thailand because of the political troubles.
The daily trading volumes in the second half are expected to stay at 40 billion baht (US$1.27 billion), down from 55 billion baht ($1.75 billion) in the first half, because of market volatility and the political uncertainty. The securities firm has not changed its target for the SET Index by the end of this year at 1,570 points.
He said investors were expected to wait for a couple of weeks to ensure the political situation would not affect the stock market.
Deputy Commerce Minister Nuttawut Saikuar said the government would try to prevent harm and tension and end the protest as soon as possible.
He said the anti-government rally should not be broadened or create turbulence.
"The rally should be [kept] under control. The group has moved to show its opinion. The rally should not have a huge impact on economic growth."
He also said that after discussing the matter with representatives from trade associations, he believed they understood to that such political activities were normal under the democratic system. If activists do not prolong their rallying, enterprises are confident that it will not affect business.
However, the private sector still hopes that the activism will end soon to ensure continued economic growth, as the priority sectors that would be hit hard are tourism and trade.