The Bank of Thailand (BOT) has forecast no significant additional pressure on the baht to appreciate despite a lower surplus or a likely deficit in the balance of payments next year.

The baht does not need to move to the same degree as the Chinese yuan, the central bank said.

Speaking on the Money Channel, BOT Governor Tarisa Watanagase said the economic fundamentals indicated there would be no more pressure on the baht to appreciate. Increase in imports from mega-project investments and imports of aircraft would lessen the surplus in the balance of payments or cause a deficit.

"Imports would reduce pressure on the appreciating baht," she said, but added the unit could fluctuate in the short term due to capital movements.

This year's balance of payments was projected to show a surplus but lower than last year's figure of US$12.7 billion (Bt438.15 billion). This is mainly due to lower exports as a result of the global economic slowdown, she said.

The baht has risen by 4 per cent since the 30-per-cent reserve requirement was introduced, compared with India's rupee at 10 per cent, the Philippine peso (8 per cent), the Indonesian rupiah (6 per cent) and the Burmese kyat(5 per cent).

The governor said the central bank's relaxation of financial institutions' investments abroad would also help cool the appreciating baht as the country had recently experienced capital inflows to the Thai bourse and direct investment.

However, foreign investment funds (FIF) over the past four years have recorded only 18 per cent of the approved figure of $3.3 billion. The governor said mutual fund managers should develop attractive new financial products to boost the FIF as the central bank had already relaxed the investment limit.

BOT director Titanun Mallikamas said the baht's movement does not need to be to the same degree as the yuan's movement as the baht has appreciated higher than the yuan's 2.5 per cent. "We have to take a close look at China's actual intention for the yuan's widening band and how it lets the yuan move," he said.

Tarisa said if the widening band against the US dollar of 0.5 per cent was implemented practically, a stronger yuan would strengthen the competitiveness of countries in the region including Thailand, which earlier lost ground because the yuan has been slightly stronger - but weaker in terms of trade weight.

Separately, Ampon Kittiampon, a director ans also the secretary of the National Economic and Social Development, said he had been monitoring how much banks would slash market rates after the central bank's sharp cut of the key interest rate.  He said the current policy interest rate was appropriate and created a balance between inflationary pressure and a sluggish economy.

Anoma Srisukkasem

The Nation