Thai Economy

• Unified MPC cuts rate to 2.50% — For the first time this year, the BoT yesterday cut its benchmark interest rate by 25 basis points to 2.5%, acting to cushion against risk to domestic demand after weaker-than-expected first quarter economic growth. “Against the backdrop of continued financial stability concerns, the MPC thus voted unanimously to reduce the policy rate by 25 basis points from 2.75% to 2.5% per year,” the MPC said in a release. (Bangkok Post, 30/05/13)
• Kittiratt backs cut, throws jabs — Deputy Prime Minister and Finance Minister Kittiratt has thrown his support behind yesterday’s 25 bps cut in the policy interest rate by the MPC, but said “It’s too small and too late, but better than nothing.” (Bangkok Post, 30/05/13)
• Kittiratt warns of price hikes — Finance Minister Kittiratt yesterday warned the public to brace for the cost of living to rise further, but said the government will work to cushion the impact by implementing policies to boost incomes. (Bangkok Post, 30/05/13)
• Weak GDP may bring rate cut — BoT deputy governor Pongpen Ruengvirayudh has admitted that the country’s first quarter GDP was weaker than expected, with domestic consumption and investment growth slowing, while exports remained resilient. The disappointing growth rate of 5.3% for the first quarter has increased the chances of a reduction in the policy rate at today’s MPC meeting. (Bangkok Post, 29/05/13)
• Government seeks capital flow crackdown — The Finance Ministry will amend one of its ministerial regulations to allow for better measures to control capital inflows and outflows. Deputy Prime Minister Kittiratt said after a cabinet meeting yesterday the amendment has been submitted to the Secretariat of the Cabinet for publishing in the Royal Gazette and is expected to be effective in the next few days. The existing regulation, Mr. Kittiratt said, allows the government to control only capital inflows but not efficiently control capital outflows. He said a mechanism to curb capital inflows and outflows is needed because the government projected a further appreciation of the baht over the remainder of the year. (Bangkok Post, 29/05/13) 
• NESDB defends data, blames post-flood high base — Thailand’s key economic agency has defended its projection methods, saying they are in line with international standards, after the BoT raised questions about some of its data released last week. The central bank claimed there were large discrepancies when compared to its own statistics. (Bangkok Post, 28/05/13) 
• UTCC: Policy rate cut unlikely — The Bank of Thailand is not likely to reduce its benchmark interest rate on Wednesday even though economic growth has not been as strong as expected, says economist Thanavath Phonvichai. Mr Thanavath’s view is at odds with the market consensus that the central bank’s Monetary Policy Committee (MPC) will trim its benchmark rate by 25 basis points to 2.50% this week. The central bank has been under heavy political pressure to cut interest rates in order to weaken the baht and help exporters affected by the exchange rate. However, market anticipation of central bank action has already pushed the baht back to almost 30 to the US dollar, from a peak of 28.55 a month ago. (Bangkok Post, 25/05/2013)
• PM hopes for Japan investment — Prime Minister Yingluck Shinawatra said she hoped more Japanese investors would take part in the government’s infrastructure megaprojects following her visit to Japan. The premier on Friday delivered a speech in Tokyo in which she said the Thai government had listened to the concerns of Japanese investors and was ready to do more to accommodate them. (Bangkok Post, 25/05/2013)
• Household debt not a worry, FPO says — The Fiscal Policy Office (FPO), which is under the Ministry of Finance, insists that the rising trend of household debt is not a worry yet, as its growth is in line with the country’s economic expansion. Last year, total personal income grew by 7.3%, while consumer borrowing rose by 21.6%, which showed that Thais had more debt than earnings. Debt was 0.82 times of personal income last year compared with 0.74 times in 2011. Somchai Sujjapongse, director-general of the FPO, said there was no sign of a worrying trend on household debts. He cited respective data on household debt from the Office of the National Economic and Social Development Board and the Centre for Economic and Business Forecasting of the University of the Thai Chamber of Commerce as making the same conclusion. Clearly, its growth was on par with the economic trend. Also, there has been no sign of worrying levels of bad loans in this segment so far. (The Nation, 27/05/2013)
• Global Economy
• China: IMF again cuts China’s GDP growth forecast — The IMF yesterday cut its 2013 growth forecast for China to around 7.75%, citing a sluggish global recovery which hurt exports. The fund had previously predicted growth of 8% in the world’s second-biggest economy this year. (AFP, quoted in Bangkok Post, 30/05/13)
• World: The Organization for Economic Cooperation and Development (OECD) on Wednesday revised down global economic growth to 3.1% from 3.4% in 2013, and 4% from 4.2% in 2014. In its latest bi-annual outlook, the OECD said “exit from unconventional monetary policy, when needed, may be difficult to manage and less smooth than desirable, possibly leading to sharp rises in bond yields and serious negative consequences for growth in a number of advanced and emerging economies.” (Xinhua, 30/05/13)
• US: The U.S. mortgage application activity dropped for the third straight week as key interest rates reached their highest levels in a year, the Mortgage Bankers Association ( MBA) reported Wednesday in its Weekly Applications Survey for the week ending May 24. “Rates rose in response to stronger economic data and an increasing chance that the Federal Reserve may soon begin to taper their asset purchases,” said MBA Vice President of Research and Economics Mike Fratantoni. (Xinhua, 30/05/13)
• US: U.S. home prices in March posted their highest annual gain since 2006, according to a report released Tuesday by S&P Dow Jones Indices. The S&P/Case-Shiller 20-City Composite for March also rose 10.9% YoY. The 10-city and 20-city composite index increased by 10.3% and 10.9% respectively in March from a year earlier, and all 20 cities posted positive year-over-year. In the first quarter of 2013, the national composite rose by 1.2%. On the monthly basis, the 10- and 20-city composite indices both posted increases of 1.4%. The market was also bolstered by a strong Conference Board Consumer Confidence Index, which jumped to 76.2 in May from the revised-up figure of 69.0 in the prior month. The May reading marked the highest level since February 2008, a report showed Tuesday. (Xinhua, 29/05/13)
• US: New orders for U.S. manufactured durable goods in April rose 3.3% to US$222.6bn, led by strong demand for defense and non-defense aircraft, the Commerce Department reported Friday. Durable goods orders in March were revised up to a 5.9% decline, the department added. (Xinhua, 25/05/13)