Sommai to cooperate with central bank
Thailand’s new finance minister said he will work smoothly with central bank governor Prasarn Trairatvorakul to help support the economy and the currency.
“Between the two of us, we will be able to work smoothly, no fighting,” Finance Minister Sommai Phasee, 70, said in his first interview after taking office last week. “I appreciate what he is doing now on the currency. I think he is doing a very good job on that. Basically, I agree.”
Prime Minister Prayuth Chan-Ocha, the army chief who seized power on May 22, has pledged to quicken spending, promote investment and tourism, and create jobs to spur economic growth after months of political uncertainty. Sommai’s approval of Prasarn’s methods stands in contrast with his predecessor Kittiratt Na-Ranong, who clashed with Prasarn over interest rates and complained of a lack of communication because of their opposing economic views.
“At this juncture, monetary and fiscal policies need to be synchronized and support each other,” said Kampon Adireksombat, an economist at Tisco Securities Co. in Bangkok. “We have seen in the past the negative image when the government and the central bank can’t get along; we don’t want to see that again.”
The baht slipped 0.1 percent to 32.263 against the U.S. dollar as of 1:44 p.m. local time. It has strengthened more than 1 percent so far this year, among the best performers in Asia of 11 currencies tracked by Bloomberg. The benchmark stock index fell 0.1 percent.
The central bank, which cut its policy rate earlier this year, may leave it unchanged for a fourth meeting on Sept. 17, according to all 19 economists in a Bloomberg survey.
“The Bank of Thailand has to be the referee” on the baht, Sommai said today. Monetary policy is “quite balanced,” and while exporters may want to benefit from a certain level in the currency, there are other factors to consider, he said.
Thailand avoided a technical recession last quarter after gross domestic product grew 0.9 percent from the previous three months when it shrank 1.9 percent, data showed. The state planning agency forecasts full-year growth at 1.5 to 2 percent.
Consumer confidence climbed to the highest in a year in August. Global funds have bought a net $5.04 billion of Thai bonds and equities in the quarter to date, according to data complied by Bloomberg. The finance ministry will introduce new instruments for infrastructure projects, Sommai said this month.
“The government needs to take action and deliver what they have promised to the public as soon as possible,” said Kampon. “They need to speed up spending and investments in infrastructure to meet the market’s expectations. If not, confidence may fade. Now that they have high investor and consumer confidence to back them, they need to make use of it.”
Sommai, who was part of the government that was installed following the last coup in 2006, was named to his new post by Prayuth earlier this month along with 11 military officers in the 32-member cabinet. Prayuth assumed the post of prime minister last month after he was appointed by his hand-picked legislature, more than half of them military personnel.
Prayuth has said elections will be held no earlier than late-2015, after his junta and its appointed bodies write a new constitution and enact measures to “reform” politics and society. Sommai, whose family name Phasee means “tax” in Thai, said his great-grandfather was a government official who collected tax in southern parts of Thailand including Phang-nga and Phuket. He said he understood why investors may be skeptical of a military-led government.
“Some investors asked me a very good question: can you trust the military man?” Sommai said. “I said that you can see and I can see that the prime minister is the key, and he focuses a lot on eliminating corruption. And if he can do that successfully, then it means that they aren’t going to perform corruption themselves and the whole cabinet won’t do it. And that will be a good answer to whether they are good or bad.”