Tuesday February 19, 2013
Strong Thai GDP weakens government case for rate cut
BANGKOK: Thailand's economy grew a far stronger-than-expected 3.6% in the fourth quarter of 2012 from the previous three months, a pace that undercuts government calls for lower interest rates.
Exports picked up in the quarter while, as in other South-East Asian economies, and domestic demand was buoyant, helped by a surge in new car purchases that was spurred by a government subsidy for first-time buyers.
Finance Minister Kittirat Na Ranong has put pressure on the Bank of Thailand (BoT) to cut interest rates to help exporters and discourage capital inflows, which have pushed the baht up around 2.5% this year. This month, he said he had written to the central bank which zealously guards its independence from government to press his case.
After a quarter-point cut in October to 2.75%, the monetary policy committee has left the benchmark rate unchanged at its last two meetings. Most economists expect it to hold fire again tomorrow, especially after yesterday's buoyant GDP data.
“The rate cut cycle is probably over despite pressure from the government. In fact, the focus will likely turn towards inflation, especially considering the robust growth number,” said economist Eugene Leow from DBS Bank in Singapore.
The economy grew 6.4% in 2012 and the National Economic and Social Development Board, which compiles the data, forecasts 4.5% to 5.5% for this year.
Although BoT governor Prasarn Trairatvorakul is relaxed about inflation, playing down the impact of a jump in the minimum wage in January, he has noted a jump in consumer credit, which an interest rate cut would only exacerbate. - Reuters