BoT governor says financial stability risks remain

By BLOOMBERG

SINGAPORE • Thailand’s central bank governor Veerathai Santiprabhob said there are still financial frailties in the economy, which are being tackled through a combination of measures, including macro-prudential steps and the monetary stance.

Interest rates have been “low for too long”, leading to an under-pricing of risk in the financial sector, which prompted the Bank of Thailand (BoT) to raise its policy rate in December, Veerathai said in an interview yesterday with Bloomberg Television’s Haslinda Amin in Chiang Rai, northern Thailand. Those risks are still there, he said.

“It will take some time to address concerns on financial fragilities and they can’t be addressed by one policy alone,” he said.

The BoT raised its policy rate in December by a quarter point to 1.75%, the first increase since 2011.

The BoT expects only a moderate slowdown in Thai economic growth this year, to 3.8% from 4.1% in 2018. Inflation last month pushed past 1%, the lower bound of the central bank’s target zone that stretches to 4%.

Veerathai said the range of 3.8% to 4% is consistent with the economy’s potential growth rate. There is “definitely a downside risk” to the growth forecast, but a certain amount of that has been incorporated into the central bank’s projections already.

The governor said the slowdown in China is a worry for economies in South-East Asia, and a trade agreement between the US and China will help improve the outlook. — Bloomberg