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Thailand Still Maintains Economic Stability amidst Political Uncertainties

February 3, 2014 Destination Thailand No Comments Email Email

Thailand is still able to maintain economic stability despite impacts of political protests on the country’s economic growth.

Governor of the Bank of Thailand Prasarn Trairatvorakul believed that sound economic fundamentals would enable the country to cope with volatility in global financial markets.

He cited four major factors as Thailand’s “immunity” that protected it from negative effects. First, the country has no problems of economic imbalance, such as high inflation or continuing current account deficit. Second, Thailand is able to maintain the flexibility of its currency and the stability of capital inflows and outflows. Third, Thailand’s reserves are at a high level; it currently represents 50 percent of GDP. Fourth, the private sector, especially commercial banks, remains financially strong, so the stability of financial institutions will facilitate economic liquidity.

However, Mr. Prasarn said that if the ongoing political situation was prolonged, the country’s immunity would weaken and disadvantages would be seen in higher production costs of various economic activities. The potential for competitiveness would also become a matter of concern.

He stressed the need for effective risk management and efforts to create confidence among traders and investors. He believed that every crisis offers an opportunity for consultations to seek solutions that would be favorable to the country’s economic growth in the long run. More importantly, Mr. Prasarn said, Thailand needs collective efforts to move the country forward. The private sector should play a leading role in bringing up important issues for a new government, which would work to drive the country’s economy and create mechanisms for good governance.

The Bank of Thailand estimated that the Thai economy would grow by only 3 percent in 2014, instead of 4 percent as predicted earlier. The country’s investment continues to grow and the Thai baht remains stable. The recovery of the world economy and Thailand’s political conflicts should be a focus of attention, as they are important factors for Thailand’s economic growth.

Mr. Prasarn pointed out that the Thai economy was also pressured by external factors, especially those concerning emerging markets. As for the problem of the rice pledging scheme, many farmers have not yet been paid for their rice and they suffer from a lack of savings. In this regard, he urged the caretaker government to speed up rice sales from the stockpiles to get money to pay for farmers, instead of borrowing from financial institutions.

Meanwhile, Permanent Secretary for Commerce Srirat Rastapana said that Thai exports in 2014 are likely to grow by 5 percent, compared with an export contraction in 2013. As for worries that the political situation might affect exports, she said that agencies concerned would assess the situation and set the country’s export target in March 2014.

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