Political instability dilutes effectiveness of monetary policy: Tarisa

Though there is room to ease monetary policy and increase public spending, confidence is important for reviving growth, she said at seminar hosted by Thammasat University's Faculty of Economics.

She pointed out that both consumers and investors had low confidence in the economy due partly to political instability. Government spending posted negative growth in the second and third quarters, largely because of the political instability.

Tourist arrivals also dropped in September.

Tarisa said the country had the ability to withstand the global financial crisis because of solid foreign-exchange reserves and low short-term debt.

Foreign direct investment has not deteriorated and only portfolio investment has been adversely affected, she said.

Due to the resilience of the economy, the baht has not weakened significantly compared to other currencies in the region, such as the South Korean won, Tarisa added.

Wichit Na-Ranong honorary president of the Tourism Council of Thailand, expressed concern about the ongoing street demonstrations. He said large numbers of Russians had cancelled trips due to the political rallies in Bangkok.

He urged the government to respond quickly to the safety concerns of tourists. It should inform them that the demonstrations are only in Bangkok. The tourism industry is very sensitive to the political situation, he said.

Wichit is afraid that the continuing political conflict will continue to hurt the tourism industry. He called for the government to promote inbound tourism among Thai travellers.

Pornsil Patchrintanakul, secretary-general of the Board of Trade of Thailand, said the food industry would not be badly affected by the global crisis.

However, he urged private firms to improve the quality of their products to meet world standards. The challenge for local firms is also how to strengthen local consumption, he said.

Rachanee Potjanasuntorn, director-general of the Department of Export Promotion, said export growth this year was now expected to be 20 per cent in dollar terms. Next year, exports are expected to grow by just 5 per cent.

He said the Commerce Ministry would promote agricultural and food products, and expressed optimismc about exports to new markets such as Africa and the Middle East.