Thai central bank plays it cool while Turkey stokes heat

While Turkey is stoking the heat at emerging-market central banks already pressured by global monetary-policy tightening, Thailand is playing it cool.

Countries such as Indonesia and India were already raising interest rates as their currencies weakened, even before Turkey's travails fanned talk of contagion.

Thailand, in contrast, is proving more resilient, aided by flush foreign reserves, baht stability and benign inflation amid steady growth.

That is giving Thai policymakers a degree of comfort even as some developing-world counterparts struggle. Bank of Thailand Assistant Governor Chantavarn Sucharitakul said on Tuesday there is no reason for pre-emptive action yet amid the Turkey rout as Thai markets are orderly.

Thailand is tied for the second-least vulnerable of 19 emerging-market economies based on current account, external debt, inflation and government effectiveness, according to a Bloomberg Economics analysis.

The Bank of Thailand for much of this year expressed a no-rush view on hikes even as Federal Reserve tightening forced some other nations to follow the US lead. Thai officials have signalled the possibility of lifting borrowing costs from the near-record-low of 1.5 per cent, but that is more to create policy space for future downturns rather than because of what is happening in the US or the Turkey fallout.

Here is a look at the resilient fundamentals framing the debate around Thai monetary policy:

Foreign reserves

Thailand has a healthy war chest to stem currency instability, a key cushion given the US$455 billion (S$626 billion) economy's dependence on exports and tourism. The foreign reserves set it apart from a number of peers, providing breathing room for monetary policy.

Currency

Most Asian currencies have weakened against the dollar this year, except for the yen, playing its role as a haven in times of stress. The baht has dipped 2 per cent over the same period, one of the smallest declines in the region.

Inflation

Thai inflation only recently broke back into the central bank's target range as oil prices climbed. The prospect of a durable acceleration in price growth could add to the case for an interest-rate hike before the end of the year.

Growth

Thailand's growth has not been a barn-burner, but is not shabby either for an economy still trying to ignite private investment and consumer spending. Expansion stands at a five-year high of 4.8 per cent, with much of the policy debate riding on the next batch of growth data, set for release on Monday.

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A version of this article appeared in the print edition of The Straits Times on August 17, 2018, with the headline 'Thai central bank plays it cool while Turkey stokes heat'. Print Edition | Subscribe