China’s central bank announcement Tuesday of its benchmark interest rate hike by 0.25 per cent will not affect Thailand’s consideration of its policy interest rate at the next meeting of the Monetary Policy Committee to be held on March 9, according to a senior Bank of Thailand (BoT) official.
The major factor weighing down growth next year is the sharp slow down in the global economy, particularly the contraction of the economies that are Thailand’s major export markets – US, EU, and Japan.This will have a large negative impact on Thailand’s exports of both goods and services which has been the major source of income and the driver of the output growth in the past few years. The US dollar value of exports of goods is expected to expand by only 8 percent in 2009, compared to around 20 percent this year.
Efforts continue to move forward to strengthen Thailand’s financial markets. Last November, the second Financial Sector Master Plan (FSMP), and the Capital Market Development Master Plan (CMD) were approved by the government. These will not only encourage competition in the market, but will reduce operating costs and strengthen the infrastructure. Those companies that had listed on the Stock Echange of Thailand or on the MAI are reported to have done well throughout 2009, “posting net profits of 446 billion baht which is a 42-percent increase over 2008.”
In line with what Prime Minister Abhisit Vejjajiva has said regarding the need to transition Thailand’s economy to become a knowledge-based creative economy, the Bank writes that “Thailand’s long-term challenge is to move a large share of the labor force currently in agriculture or otherwise performing simple, low value-added tasks into the dynamic parts of the economy.”
Measures will be needed in Thailand to mitigate the short-term impact of the global crisis on low-income groups and small and medium enterprises (SMEs).As economic growth slows down, there have been reduction in work hours and the rise in layoffs of workers from the manufacturing sector since September. It is expected that almost 1 million employees (or 2.6 percent of the workforce) will be laid off next year .These will lead to unemployment for some, while most will move to the informal sector. There will need to be targeted measures to assist these groups of people as well as programs to improve their skills, so that they are able to return to the formal sector employment when manufacturing growth rebounds in the next couple of years. Similarly, the impact of an economic downturn on SMEs will be greater than on larger firms, as SMEs generally have less excess cash and ability to borrow from banks.Loan extension to SMEs as well as measures to increase their productivity and risk management are necessary for them to maintain their operations in the next few years, as well as remain competitive in the longer term in Thailand.
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