Stronger Thai baht affects economy

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Stronger Thai baht affects economy
-- NNT 2010-10-20

BANGKOK (NNT) -- The baht appreciation will affect the economic growth by up to 2.7 percent. Meanwhile, the Ministry of Finance has predicted that that US Dollar might get weaker, and urged entrepreneurs to be ready to cope with it.

According to The Fiscal Policy Ofiice (FPO) Finance Minister Korn Chatikavanij said that stability of the nation’s economy is partly influenced by inflation. The higher the inflation rate, the more the people and businesses will be affected. Thailand has been so used to low inflation rates in the past ten year that it does not realize the true effect of inflation.

As for MR. Pridiyathorn Devakula’s suggestion that the government impose a “Tobin tax” as a means to curb capital inflows, the Minister said the government was ready to listen to suggestions from all parties and would discuss them with the Central Bank. As for the 15% tax imposed on capital gains and interests earned from government and pubic enterprises’ bonds, Korn said the measure was effective given the amount of purchases had decreased. He also advised that entrepreneurs increase their production efficiency as he believed the greenback would depreciate further against the baht and other regional currencies.

As regards the concept of “Tobin tax”, which is aimed at reducing or removing the incentive for short-term financial speculation in the currency markets and allowing authorities to control capital flows, Naris Chaiyasoot, the Director of Fiscal Policy Office (FPO), said the Office was studying it; however, whether the concept will be applied depends on the top-level-management’s decision.

The appreciation of the baht, to the tune of 10% during the past nine months, has affected the country’s economic growth by 2.7 percent, which, in turn, might cause the GDP to grow less than 7%, as earlier expected.

[Elias75]

I agree if the inflation still continues then the prices of the basic commodities as well as the not basics will get higher and higher. In that cases the Businesses that use raw materials will then also make their prices higher. Then the consumer will have difficulty in buying these items thus they will be force not to but anymore.