finance minister sees thailands economic recovery largely unaffected by dubai
News Posted On: 27 November 2009
Dubai was an accident waiting to happen, and the problems with its debt repayments have understandably sent shockwaves through global financial markets sensitive to the damage caused by last year's crisis.
Thai stocks lost 1.4 percent on Thursday and a further 1.2 percent in early trading on Friday, largely due to worries about exposure to Dubai. However these losses were less than those suffered by the UK markets, and today Thailand's Finance Minister Korn Chatikavanij said his country's economic recovery had not been put at risk by events in Dubai.
'Bubble signs normally come from the property sector and stock market. There is no price pressure in the [Thai] property sector and the roughly 60 percent stock rally this year has fairly reflected improving corporate earnings and economic fundamentals,' he said.
Thailand's economic growth is unlikely to force monetary tightening soon, a move that would push the baht higher, according to Korn. Analysts agree, expecting the Bank of Thailand to maintain the hefty rate cuts implemented at the start of the year to boost economic growth until next year. All 13 economists recently polled by Reuters forecast that at next Wednesday's policy meeting the central bank would keep its one-day repurchase rate steady at the current record low of 1.25 percent for a fifth straight month.
'Interest rates and inflation are not issues of concern and our financial markets are flush with liquidity,' Korn said. 'We try to maintain currency stability to facilitate normal trade and any rate rise would not be in line with our current policy.'
Dubai's unique debt problems are as a result of an over-ambitious plan to rapidly turn the region into a prestige hub for tourists and business, with the infrastructure spending and funding unfortunately coinciding with the global downturn. Korn said the Thai economy was in no way in a similar situation.
Despite the fact that it was wrong footed by the global crisis this time, Korn said that Dubai and the Middle East in general are promising new markets with economies supported by oil, and that in his opinion Dubai's current debt problems would not adversely affect Thai exports.
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Written by Les Calvert
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