What are the main factors that will affect Thailand’s economy in 2011? What is your current growth forecast?
The forecast [for 2011] is 3% to 5% in real growth. This year we may end with 7.3% to 8%, based on our forecasts. Exports this year will be growing at 25% to 30% and next year will come down to 11% to 14%. But we observe a strong continuity of domestic demand. Growth next year will be more balanced.
How do you arrive at your forecast for slower export growth? What do you expect in terms of global demand?
We see slack and low growth in G3 countries [Germany, Japan and the US], and in some of the Asian countries, and under these circumstances we expect to see them tightening up a bit. Take China, for example. It may tighten its monetary and fiscal policy somewhat and that may slow its growth rate. Other non-G3 trade partners may see some slowdown. Add to that the fact that we’re coming off a high base this year.
Do you see inflationary pressures building up?
At the moment, the price level is quite stable. But next year, because of the narrow output gap that we observe, there will be a passing of the price increases onto consumers. This is unavoidable. Sometime in the middle of next year we’ll see the pass-through of these increases, hence we’re forecasting some increases. This year our core inflation was less than 1%. Next year we’re forecasting in the range of 2% to 3%. It’s an increase but still within the target of the Monetary Policy Committee.
You raised the Bank of Thailand’s benchmark rates by 25 basis points on December 1 [2010]. Has normalisation begun? Is Thailand in step with the region?
The signal for normalisation had been sent out before the December 1 meeting. One can argue from either side. Quarter-on-quarter figures pointed to a slowdown. But when you take the real rate into consideration you still have some gap to fill in. The reason for raising rates by 25 basis points is to send the signal that it is not necessary anymore to use a low-interest-rate regime to accommodate the previous crisis that happened two years ago.
If you look at inflationary pressure in China, Hong Kong, Singapore and India, it is very different from here. In these countries you’re seeing big pressures. I think each country has its own conditions.
How significant is QEII [the US Federal Reserve’s quantitative easing policy] for Thailand and what are the implications for price stability?
This has been a source of concern for the past three or four months. We experienced a huge amount of capital flow, particularly in the third quarter of 2010, which caused the baht to appreciate. We’re trying to cope with this situation in a balanced manner and not go to extremes. We’ve adopted a mixture of policy instruments. Since we’re in a flexible exchange-rate regime we let the baht move according to fundamental conditions. But in the short term the Bank of Thailand is also buying foreign currencies, which increased our foreign reserves.
We’re also trying to liberalise on the outflow to balance the inflow. Thai citizens are now allowed to bring out more currency, whether for property or other investments. Exporters are also granted much flexibility in sending back their foreign earnings.
Do you think capital controls are needed to slow the rise of the baht?
At the moment: no. But in terms of preparation, yes, we have this in hand. Judging from the flows [from QEII], at the moment my answer is no.

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