Thailand’s Growth to Slow, Central Bank’s Tarisa Says




By Vivien Lou Chen

Sept. 6 (Bloomberg) — Thailand’s central bank Governor Tarisa Watanagase said that the country’s economy will probably slow in the second half of the year and that there’s little threat from consumer prices.

“Inflation has been benign all along, whether headline or core,” excluding food and energy costs, Tarisa said in an interview before a speech today at a conference on Asian banking in San Francisco. The slowdown in export growth during recent months is “not anything unexpected,” she added.

Thailand’s central bank has lowered its benchmark interest rate at five of six meetings this year to spur spending and contain an appreciating currency. Consumer confidence is at a five-year low after sliding in most months since the military coup last September. Tarisa declined to comment on the prospect of another rate cut this year.

The junta that runs the country is seeking to protect exports, which comprise 60 percent of the economy. Shipments abroad increased 6 percent in August after advancing 6.2 percent in July and as much as 18 percent in June.

Consumer prices rose 1.1 percent in August from a year earlier, the slowest pace since September 2002.

Southeast Asia’s second-biggest economy expanded 4.4 percent in the second quarter from a year earlier, compared with a 4.2 percent gain in the first three months of 2007.

Tarisa said she’s “keeping a close watch” on the U.S. subprime-mortgage crisis, though “right now it hasn’t shown up significantly in our markets.”

`All’ Concerned

“All central banks are concerned about it,” Tarisa said. Central banks from Australia to Europe and Canada, as well as the Federal Reserve, have injected funds into money markets to ease a liquidity shortage in the past month.

Thailand’s central bank chief compared the subprime mortgage boom to the atmosphere in Thailand before the 1997 Asian financial crisis, with bankers and borrowers in “a state of euphoria” and cheap money readily available.

Asia has emerged more resilient in the past decade, with improved supervision of banks and risk management, Tarisa said in her speech. “These changes in policies and risk awareness make it less likely that financial market disturbances will trigger a sharp and broad-based dent to real economic outcomes.”

One of the biggest challenges facing Asia is the pressure for rapid appreciation in exchange rates, she said.

In December, the Bank of Thailand placed limits on foreign investors’ funds to try to curb gains in the baht. The rules require 30 percent of foreign investment funds to be locked in bank accounts, subject to penalties if cash is withdrawn within a year. That’s spawned a two-tiered foreign exchange market, where the offshore rate has risen twice as fast as the official price of the baht.

Thailand’s central bank chief said she doesn’t anticipate any change for now in the capital controls.



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