Huge inflow puts balance of payments at new high

About US$2 billion (Bt54 billion) of net foreign capital flooded into Thailand in December alone, skyrocketing the baht to its nine-year high of Bt35.04 per dollar before the Bank of Thailand introduced its unremunerated reserve requirements on December 19.

The huge amount of capital inflow, along with a current-account surplus of $1.22 billion, pushed the balance of payments to a surplus of $3.17 billion in the month. The balance of payments for the entire year hit a historical high, in surplus by $12.7 billion.

In 2006, the current-account surplus came in at $3.24 billion as the trade surplus was $2.25 billion and service and transfer accounts were $996 million. The baht averaged Bt37.93 to the dollar for the year, compared with Bt40.29 in 2005.

Earlier, the central bank said that about $900 million of capital inflow flooded into the country in the first week of December alone.

Amara Sriphayak, the central bank's senior director, yesterday said exports in December had not been adversely affected by the appreciating baht. High growth of trading partners' economies played a key role in the growth of exports, rather than the impact of the currency. However, exports could be hurt if the baht continued to surge.

Exports were the key engine driving last year's economic growth of about 5.1 per cent. They expanded by 17.4 per cent from the previous year, higher than the 15-per-cent growth posted in 2005. The central bank hopes that exports, along with domestic demand, will play a major role in driving the economy this year.

However, the Business Sentiment Index in December was 45.0, lower than 45.7 the previous month. The index of sentiment for the next three months declined from 52.7 to 51.6 per cent, according to the central bank.

During 2006, the Private Con-sumption Index rose by 1.3 per cent, against 0.6 per cent the year before. The Private Investment Index increased by 1.3 per cent, lower than the 8.5-per-cent growth in 2005.

Market forecasts are that the baht this year will continue to be strong due to a weakening dollar, but it is projected to rise at a slower pace as less capital is expected to flow into the country.

Narongchai said the baht's volatility had had an impact on foreign direct investment rather than on the bourse. The central bank should manage the unit with interest rates along with market intervention in an appropriate amount and at the appropriate time.

The Industry Ministry estimates that the manufacturing sector will grow by 5-6 per cent this year. Permanent secretary Chakramon Phasukavanich said the central bank should relax its draconian measures for any project under promotion by the Board of Investment.

Anoma Srisukkasem

The Nation
Thu, February 1, 2007