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Economy

Bank of Thailand's new chief wary of fallout from protests

Sethaput poised to take necessary steps as protesters vow to continue rallies

BANGKOK -- Bank of Thailand's new governor Sethaput Suthiwartnarueput told media on Tuesday he is "closely watching the ongoing protests and their impact on the economy."

In his first news conference since assuming the post on Oct. 1, Sethaput hinted at the possibility of the economy taking a further hit due to the protracted conflicts between youth-led protesters and the government.

At 4 p.m., local time, organizers called on protesters to gather at train stations at 5:50 p.m., reiterating their warning of a "big surprise" if the government does not release all their allies and scrap the emergency decree.

After 6 p.m. the "big surprise" turned out to be a decision to take a break from large rallies, though crowds did gather outside some stations. The plan is to stage a big protest tomorrow, they say, since the government decided to ignore their call to release all detained demonstrators and cancel the emergency.

"I have to acknowledge that I am facing economic challenges from day one as governor," Sethaput, a former economic adviser to Prime Minister Prayuth Chan-ocha, told media assembled at the bank.

He said, "The Thai economy is expected to remain sluggish and needs a long time for the government and the BOT to tackle the economic slowdown caused by the COVID-19 pandemic."

The Bank of Thailand forecasts 2020 gross domestic product to contract 7.8%, due largely to a sharp drop in foreign tourists and weak consumption.

"We do not expect economic activity and GDP to be as robust as before the pandemic until the third quarter of 2022," Sethaput said. "However, [the BOT] could see the Thai economy to start to recover...[and] GDP enter positive territory for the first time by the second quarter of 2021."

The scenario is largely in line with analysts' views on the economic outlook of the kingdom. Kasikorn Research Center forecasts the Thai economy to gin a U-shaped recovery next year.

As the sluggish economy persists, Sethaput said, "There is not much we can do in terms of cutting interest rates because they are already at a historic low."

But Sethaput reiterated that the bank is "ready to take necessary steps," hinting at injecting extra liquidity if the economy shows signs of further contraction due to the protests.

At the latest policy meeting on Sept. 23, the central bank kept the one-day repurchase rate steady at an all-time low of 0.50% for a third straight time as was widely expected.

While it raised the 2020 GDP forecast, the bank still expects the economy to shrink by a record 7.8% in 2020, versus a previous forecast of 8.1%.

Unemployment stood at a little over 1% in the first quarter of the year. However, the number of jobless was forecast to double to more than 800,000 -- or even to 1.5 million -- by the end of the year due to the pandemic.

In an effort to discourage protesters from gathering and despite the economic impact of such measures, the police have periodically halted public transportation, a move that has started to disrupt the city. Businesses around demonstration venues, including retailers and hotels, are being hit.

On Monday, the protests marked their sixth consecutive day since Oct. 14 as organizers vowed on Friday to take to the streets every day, despite facing water cannons, tear gas and mass arrests.

From the outset of the pro-democracy movement, protesters have demanded the resignation of Prayuth and his cabinet, constitutional changes drafted by representatives of the people, and reform of the monarchy under the constitution, but not its abolition. Demonstrators are also increasing pressure on the government to release detained leaders.

Sethaput said, "The BOT is watching closely how long the protests will last, since they would have a negative effect on confidence and investment."

Sethaput holds a doctorate in economics from Yale University. The 55-year-old took over at the bank after former Gov. Veerathai Santiprabhob's term ended on Sept. 30.

Prior to becoming the BOT chief, Sethaput worked in both the public and private sectors in Thailand and overseas. He was a senior economist at the World Bank in the 1990s and early 2000s. He has also served as the president of SCB Asset Management and as a director of TMB Bank.

Despite no room for the central bank to cut interest rates to reignite the economy, Sethaput said the government has been applying fiscal policy by issuing several stimulus packages.

The measures include a three-month direct transfer of money to the poor and a hotel expense subsidy of 40% to encourage Thais to travel domestically.

"We may have to admit that fiscal policy will play a key role in stimulating the economy," Sethaput said. "However, as the central bank, we need to complete our mission of maintaining the country's monetary stability and sustainability."

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