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Thailand hopes US to recover from superstorm
Publication Date : 01-11-2012
Thailand is hopeful that post-storm investment in the United States in the wake of Hurricane Sandy will spur growth in the country and give a lift to the fragile global economy, Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday.
Economists forecast a preliminary loss of at least US$25 billion to $45 billion (767 billion baht to 1.4 trillion baht). Rehabilitation expenses were expected to be no less than $20 billion. The hurricane-hit areas account for 25 per cent of the US economy.
Economists expect the hurricane to shave 0.1-0.2 percentage point off the growth of US gross domestic product. US GDP totals about $15 trillion. Its effect on the US economy will likely be fully realised this quarter. The New York Stock Exchange and Nasdaq were closed on Monday and Tuesday. It was the first two-day closure of the NYSE in more than a century.
The repercussions of the superstorm were one of the highlights of a meeting chaired by Prime Minister Yingluck Shinawatra.
Ministers, government agencies and the Bank of Thailand discussed the factors weakening the Thai economy including the impacts of quantitative easing in developed economies and soft export demand.
The Bank of Thailand said external factors still weighed down the economy, which expanded only 3.3 per cent in the third quarter. The growth forecast is 5.7 per cent for the full year.
Kittiratt said that on the downside, the storm could exacerbate the situation in the US and global economy. However, a huge reconstruction budget could lift the US economy. Unlike earlier injections that went into the financial system, this money will go directly into the real economy, he said.
The National Economic and Social Development Board (NESDB) was assigned to monitor the local impacts of the storm.
"The prime minister asked all economic agencies to hold discussions and work together closely. The NESDB takes care of the overall picture of the long-term economic situation. The central bank takes charge of monetary policy. The SEC [Securities and Exchange Commission] supervises capital flows in capital markets. The Finance Ministry oversees fiscal policy and the country's overall economy," Kittiratt said.
Natural disasters usually affect three areas - business transactions, physical damage and productivity, said Methee Supapongse, a senior director of the central bank.
"It remains to be seen how this storm will affect the US economy," he said.
On monetary easing in major economies, including Japan, Kittiratt said the government has taken this matter into consideration and the Bank of Thailand has monitored the situation closely. According to the BOT, no irregularities in capital movements have been found, and foreign reserves remain high.
Excess liquidity in some countries is travelling fast to find higher returns, particularly in Asia. Hong Kong's dollar has come under attack. Though Thailand does not expect anything similar, the Bank of Thailand's data show that the country has been a destination of such capital inflows.
In September, when the US declared a third round of quantitative easing (QE3), Thailand registered net capital inflows of $499 million, or about 15 billion baht. Inflows to the bond market hit $1.46 billion or about 44 billion baht, but net inflows were much lower thanks to companies' overseas investment.
The inflows are strengthening the baht. The currency, at 30.99, gained 1.37 per cent against the US dollar in September from the previous month. The baht appreciated only 0.34 per cent against all currencies used for the trade-weighted exchange rate calculation. The stronger baht will put pressure on Thai exports, which suffer from weakening demand.
While Methee expects Thailand's exports to stage a recovery in the second quarter of next year, Kittiratt saw some positive signs. He is confident that Thailand would show an increase in exports.
In the first nine months, exports dropped 1.13 per cent from the same period last year. The Bank of Thailand forecasts 4.6-per-cent growth.
Kittiratt also urged seafood exporters to closely monitor the situation in the US to see if there would be any shortage of supplies in the country after the storm.
According to Commerce Minister Boonsong Teriyapirom, Thailand now exports a small quantity of consumer products to the US, including bottled water, snacks, milk, meat, vegetables and fruits and flashlights, which are in high demand during disasters.
Although the private sector wants a postponement of the increase in the minimum daily wage to 300 baht nationwide in January, Kittiratt insisted that there would be no review or postponement.
However, the government would consider existing measures and extend them, if possible, to relieve the private sector's burden, he said.