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Bank of Thailand may lower 2012 export growth forecast
Publication Date : 27-09-2012
Bank of Thailand (BOT) Governor Prasarn Trairatvorakul said yesterday that the central bank might downgrade its export forecast for this whole year after shipments continued to fall last month.
Exports shrank by 6.95 per cent year on year in August, according to the Commerce Ministry's data. For the first eight months, exports were off 1.31 per cent.
Prasarn said the continued weakness in exports might discourage domestic consumption and investment in the future as well as lending.
The BOT's Monetary Policy Committee will meet next on October 17, when it is expected to review the economic-growth forecast. Based on the 7-per-cent export-growth forecast, the central bank expects Thailand to register growth in gross domestic product of 5.7 per cent this year and 5 per cent in 2013.
Both growth forecasts were lowered this month, from 6 per cent and 5.8 per cent, as Thailand's export sector started to feel the pinch from softening global demand.
Prasarn said he agreed with the recommendations of Ammar Siamwalla, chairman of the Thailand Development Research Institute's advisory board, to let the baht move freely.
Ammar had said the policies to ease appreciation of the currency had discouraged exporters from improving product quality and were a financial burden to the central bank.
Prasarn said it was the BOT's highest hope to let the baht move freely.
However, that can be done only when Thai businesses are strong enough to deal with the volatility by themselves.
If they cannot and the bank allows the foreign-exchange market to become seriously volatile, this could affect the Thai economy.
The central bank also has to consider the adjustment of the business sector. If it fails to adjust, this will hurt the country's economy, he said.
He cited the case of Switzerland, which has strong production and service sectors. Once the euro-zone crisis erupted, people rushed to hold Swiss francs until that currency's value was appreciating. In the end, the Swiss central bank had to step in to prevent the franc from gaining too much.