ECONOMY & TRADE

Tarisa says weaker baht won't help
20/02/2009
By: PARISTA YUTHAMANOP

Any move to weaken the baht to help exports would ultimately prove futile, according to Tarisa Watanagase, the governor of the Bank of Thailand. The government this week suggested current exchange rates may be hurting Thailand's export competitiveness. Exports in January recorded their biggest decline in a decade with a 26.5% year-on-year contraction to $10.49 billion.

But Dr Tarisa said exchange rates had been less of a factor in export performance than the decline in demand from the United States, Japan and Europe.

A central bank study found that Thai exports would fall 1.6% for a 1% decline in economic growth for key trading partners. Every 1% decline in the value of the baht would only lift exports by 0.2%.

The baht has remained relatively stable in recent months, closing yesterday at 35.50 to the dollar. For the year to date, it has fallen 0.7%, and by 3% from 2008.

Dr Tarisa said the baht was ''in the middle of the range comparing to regional currencies'', and added that export competitiveness should not be considered only in terms of exchange rates.

The baht's competitiveness in real terms had actually improved, with the real effective exchange rate falling to 87.16 in December from 89.91 in November when indexed against 20 currencies of trade partners and competitors.

Dr Tarisa, speaking at a forum held by the Sasin Graduate Institute of Business Administration, said the rapid decline in inflation in the second half of 2008 had significantly cut business costs.

In any case, the impact of the global downturn was affecting the entire region.

''Many other countries have already experienced [steep] declines in exports. Now, we are recording a worse decline than others,'' she said. ''As a matter of fact, [the export declines] are a surprise for the region, as there was the thought that the rise in intra-regional trade could save exports. Now we know that this hope has dimmed. Our exports to China have dropped quickly in recent months.''

Pramon Suthiwong, the chairman of the Thai Chamber of Commerce, warned that the government should consider the potential increase in social disruption and stress from rising unemployment.

Migrant workers are another potential issue, he said, considering that there were two million legal immigrants registered in Thailand and an unknown number of illegal workers.

bangkokpost.com