The BOT said economic activity was set to increase as the vital tourism sector gained momentum. The BOT also said it would monitor decreasing global demand, rising prices, and China’s border reopening.

China’s action should benefit Thailand’s tourism industry in 2023. The BOT has projected 22 million foreign visitors for the upcoming year, assistant BOT Governor Chayawadee Chai-Anant said at a press conference.

“What we’ve looked at is quite conservative and will be reviewed next year,” Chayawadee Chai-Anant said.

According to the finance minister, Thailand has already surpassed the BOT’s 10.5 million target for 2022 by receiving 11 million international visitors, nearly 60,000 to 70,000 foreign tourists per day.

As private spending and tourism increased, in November, the central bank predicted that the GDP will expand by 3.2% in 2022 and 3.7% in 2023. In 2019, the economic growth of 1.5% was among the slowest for the nation in the Southeast Asia region.

Thailand being the second-largest economy in Southeast Asia is dealing with slower-than-expected global demand, Chayawadee Chai-Anant said.

According to a statement from the BOT, Thailand recorded a current account deficit of USD 0.4 billion in November and exports, another important driver of development, decreased 5.5% year-on-year.

According to Chayawadee Chai-Anant, the focus of monetary policy tightening would be on economic conditions, and the BOT will watch for any effects of rising commercial bank lending rates on the economy.

To combat inflation, the Bank of Thailand has increased its benchmark rate by a total of 75 basis points since August, to 1.25%. On January 25, the policy will be reviewed again, and another increase is anticipated.

The post The recovery of Thai economy & challenges ahead appeared first on International Finance.

In a statement, Vachira Arromdee, Bank of Thailand assistant governor said, “The Bank of Thailand will assess all results and associated risks from the Pilot Test, to ensure that Retail CBDC is beneficial to the public, business sector, and country as a whole, and does not undermine economic and financial stability in the future.”

A study conducted by the BOT concluded that the Thai CBDC will not impact monetary policy, incumbent banks, or financial stability. Additionally, the CBDC will not pay interest and will be distributed through the financial institutions of the country.

It is believed that there will be caps on conversion into a CBDC. The central bank envisages the CBDC partially substituting both cash and existing e-money.

Earlier this year, it was reported that Japan is set to begin experimenting its Central Bank Digital Currency (CBDC) later this year. Previously, Japan claimed that it won’t be issuing its own CBDC as its digital payment system was very much sufficient.

During a recent press conference, Bank of Japan (BOJ) Governor Haruhiko Kuroda said that Japan needs to prepare for a time that the country may need to issue a digital version of its currency yen.

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This connection is the first of its kind that links the retail payment system operators in both countries and also marks a key milestone in the ASEAN Payment Connectivity initiative that aims to promote financial integration in the region. The development of the QR payment system is similar to that launched between Singapore and Thailand and Malaysia and Thailand, where the countries announced their own cross-border payment.

The pilot launch of the QR payment system will focus on ensuring smooth interconnection and pave the way for customers, merchants, and operators for the full commercial launch next year. Currently, users from Indonesia can now use their mobile payment application to scan Thai QR codes to make payments to merchants all over Thailand.

Similarly, users from Thailand can also use their mobile payment applications to scan Quick Response Code Indonesian Standard (QRIS) to pay for goods and services at merchants in Indonesia along with using this feature for e-commerce transactions.

Sugeng Sugeng, deputy governor of Bank Indonesia told the media, “One interesting aspect of this project is the use of direct quotation of local currency exchange rates provided by the Appointed Cross Currency Dealer (ACCD) banks under the Local Currency Settlement (LCS) Framework to improve the efficiency of the transactions, thus lowering transaction costs.”

“The significant expected outcome of this first cross-border payment project is not only to facilitate transactions in the tourism sector but also to assist SMEs in tourist areas. This project will also increase financial inclusion, inclusive digital economy, and e-commerce transactions.”

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Businesses in Thailand will soon be able to make cross border payments to Singapore, Myanmar, and Cambodia and the facility is expected to go online somewhere in the second or third quarter of 2020.

Currently, members of Asean often find it difficult to carry out international transactions due to the unavailability of a digital payment platforms that process multiple currency payments within a short period of time.

As a remedy to the problem, Thailand has decided to leverage the QR code technology and offer a seamless cross border payment option. QR code technology enables contactless, fast and secure payments with the use of mobile apps to merchants as well as consumers.

The recent developments can be attributed to the collaboration between central banks, fintech startups, and financial institutions from the Asean region.

Siritida Panomwon Na Ayudhya told the media, “Regional interoperability of standardised QR code payments between Thailand and these nations has continued to make strides.”

Last year, Thailand also signed a memorandum of understanding (MoU) with the central bank of Cambodia to develop a similar cross border payment platform that leverages QR code technology. The platform, which is now online, facilitates cross border payments in local currencies.

Many banks in Thailand have also independently developed digital payment services that facilitate cross border payments.

In 2019, Thanachart Bank partnered with a Lao bank to develop digital payment services in the neighbouring countries. During the same period, Siam Commercial Bank and Krungthai Bank developed digital payments in Cambodia and Singapore respectively.

The post Thailand to introduce QR code for cross-border payments in Asean appeared first on International Finance.

“In the short term, we are ready to use monetary policy if needed,” he said. “We are ready to act if growth fails to meet our expectations.”

Earlier this month, the Bank of Thailand cut borrowing costs to 1.25 percent. This interest cut is the second reduction in three months. The baht is considered Asia’s best performing currency after it gained more than 9 percent against the US dollar in the last year, the local media reported. 

The Governor warned that the benchmark key interest rate should not go below zero because hitting negative will cause structural problems. The Bank of Thailand is deeply concerned about the currency’s strength. It is closely monitoring the financial situation toward the end of the year — a period when high volume of foreign exchange transactions take place. The Bank of Thailand is exploring other options to boost policy transmission process through new players or financial markets. 

Economists predict that the Bank of Thailand might cut policy interest rate next year. The country’s financial stability risk is creates challenges such as monetary risk — although inflation is not a huge problem. 

Thailand’s current economic growth forecast for 2019 and 2020 remains at 2.8 percent and 3.3 percent respectively. However, the monetary authority’s 2020-2020 strategy indicates that volatility was inevitable as it is caused by a range of unpredictable external factors. 

Also, the Bank of Thailand has decided to review foreign exchange laws to boost flexibility and allow regulations that support financial technologies such as digital currencies. 

The post Bank of Thailand to use monetary policy to fight economic downturn appeared first on International Finance.

In the last 12 months, the baht value increased 7.6 percent against the dollar affecting Thailand tourism. With that, baht is one of the best performers in emerging markets based on Bloomberg data. The tourist arrivals in Thailand dropped to 2.9 million last month from 3.03 million in the previous year. 

According to Bloomberg, tourism accounts for nearly a fifth of the GDP. “Tourism is considered to be one of our country’s main revenue drivers. I will do everything I can to make sure that arrivals increase and more revenue is generated than before,” he said. 

Meanwhile, the central bank has said that cutting interest rate might only have a minimal impact on the baht’s growing value. Instead, the central bank is planning to ease the policies on money outflows by providing additional flexibility on portfolio investments, Deputy Governor Mathee Supapongse said. Other measures such as lowering the bond supply might also help in the matter. 

“Interest rates alone can’t fix all problems,” Governor Veerathai Santiprabhob said. “Every policy comes with costs. No policy is free, so we have to consider them carefully and look at whether they suit the situation at that time.”

Veerathai also added that cutting interest rate might not have a significant effect because Thailand’s real rate is low compared to other regional countries. The central bank is willing to adjust rates which might take place in the coming months. 

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“If the Baht still maintains its gain while responsible agencies have not come up with any measures to rein in the capital inflow, we believe Thai exporters, most of which are small and medium-sized ventures, will lose 400 to 500 billion Baht worth of income,” Visit Limlurcha, vice-chairman of the Thai National Shippers’ Council, told the Bangkok Post.

The Baht averaged 32.48 to the US dollar in 2018 and is now moving in a range of 30.50 to 30.60.

According to Visit Limlurcha, this is equivalent to a loss of two Baht per one dollar in foreign exchange.

In an attempt to curb the surge of the Baht, Bank of Thailand plans to scale back the auction size of its short-term bonds.

The supply of short-term bonds, including three months, six month and one-year bonds will be reduced by the central bank.  While the size of three-month and six-month bonds will be cut by 5 billion Baht per week, the supply of one-year bonds will see a 10 billion Baht cut.

The Thai government’s mega-projects such as the eastern economic corridor and high-speed railway projects and the country’s strong economic fundamentals have made Thailand a safe haven in the eyes of foreign investors.

These factors contribute heavily towards the surge in the nation’s currency. Thailand’s tourism department is also facing the heat of a stronger Baht.

Tourism Authority of Thailand (TAT) has cut its estimate for tourism revenue growth for 2019 from 10 percent to 9.5 percent with the strong baht being one of the major reasons.

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The FinTech CA which aims to help develop a richer financial ecosystem in Thailand and Singapore as well as in ASEAN, will facilitate the BOT and MAS to divide information on emerging market trends and their impact on regulations. They will also be referring FinTech companies to their peers.

BOT and MAS also simplified their MOU on Banking Supervision, which had been in place since 2006. The MOU is working to strengthen bilateral collaboration in safeguarding the flexibility of the Thailand and Singapore’s banking systems. The newly restructured MOU sets out intricate details about the two central banks’ commitment in developing greater information exchange and cooperation in the areas of licensing, on-site examinations, supervisory colleges, and crisis management.

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