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Pattaya Daily News

16 June 2012 :: 15:06:08 pm 64344

Bank of Thailand affirms readiness to cope with eurozone crisis impact

BANGKOK, June 15 - The Bank of Thailand (BoT) Governor Prasarn Trairatvorakul reaffirmed Friday that the bank has prepared monetary measures to effectively cope with the impact of the eurozone crisis, particularly on the country’s financial institutions and financial markets.
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The impact of the eurozone crisis on Thailand’s financial institutions has not been strong, according to the governor, who reported on the situation on Friday to Prime Minister Yingluck Shinawatra.

The Thai baht has weakened 2 per cent against the US dollar, but strengthened 7-8 per cent against the euro since Greece’s May 6 general election. Mr Prasarn, however, brushed aside concerns over the baht depreciation provided that the country has strong international reserves and the baht’s movement is flexible around Bt30-31/dollar. The baht is likely to weaken further against the greenback as investors turn to US dollar as their safe haven amid the eurozone’s current debt crisis.

That the impact of the eurozone debt crisis has not been strong on Thailand’s financial institutions is because Thailand has only a small percentage of trade credit volume with Europe.

Thailand’s trade credit volume with the world is some US$30 billion, according to the BoT governor. Credits extended to financial institutions in Europe only stood at Bt470 billion.

However, the eurozone debt crisis has slowed the world economy and has affected Thailand’s export growth, reducing it to around 8 per cent.

Mr Prasarn said if the eurozone debt crisis worsens and foreign funds start flowing out of forward markets in the continent, which has foreign investments of around US$7 billion, the Bank of Thailand is still certain it can handle the situation.

Meanwhile, BoT’s Fund Management Department assistant director, Thong-urai Limpiti, said the bank has applied a stress test to all Thai commercial banks in order to test their abilities to cope with the eurozone debt crisis.

Thai commercial banks are still strong and have been only slightly impacted by the crisis, while banks with foreign shareholders have not withdrawn their shares in Thailand.

According to Ms Thong-urai, Thai banks have only 3.7 per cent (Bt56 billion) direct exposure to Europe or less than one per cent of their total assets. Thus, measures to cope with the eurozone debt crisis in Thailand have not been issued.

However, BoT warned Thai banks to closely monitor the situation and manage their risks in case European companies’ credit ratings are downgraded, face downsizing, or close their businesses in Thailand, resulting in difficulties for Thai commercial banks.

Meanwhile, Prime Minister Yingluck Shinawatra on Friday chaired a meeting of economic team to assess the impact of eurozone’s debt crisis.

Representatives of all economic-concerned agencies including the Finance Ministry, the Office of the National Economic and Social Development Board (NESDB), and the BoT, attended the meeting.

Deputy Prime Minister/Finance Minister Kittiratt Na Ranong said that the government is closely monitoring the situation in Europe to minimise its impact on the Thai economy.

The central bank on Thursday kept its policy interest rate unchanged at three per cent to ensure sufficient liquidity in the system, he said.

Mr Kittiratt is also scheduled to chair an additional meeting with his economic team to map long-term measures to mitigate impacts on Thai exports.

Report by : MCOT

Category : Business News

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