Thailand more resilient to taper tantrum: central bank

Bangkok

THAILAND is less vulnerable to any spike in global bond yields stemming from policy normalisation by the US Federal Reserve due to its low reliance on external sources for debt financing and its high foreign reserves, the Bank of Thailand chief said.

Bond yields in Thailand would be less exposed to "another taper tantrum" than those in some other emerging economies, Governor Sethaput Suthiwartnarueput told a virtual conference on Wednesday organised by the Stock Exchange of Thailand.

A low level of external debt and high foreign reserves mean "we are very resilient to a balance-of-payment type shock," he said.

Mr Sethaput joins Bank Indonesia Governor Perry Warjiyo in discounting the possibility of a major local impact once the US Federal Reserve starts unwinding its easy policy - unlike the battering some emerging markets took in 2013.

Investors are awaiting more clarity on the eventual tapering of bond buys from Fed Chairman Jerome Powell's planned speech on Friday, or at the US central bank's Sept 21-22 meeting.

"Thailand's bond market relies less on non-resident financing than what we see in other countries. So the transmission from the global spike to the local spike is not likely to be as sharp as in other countries," Mr Sethaput said. "Even if there is going to be a local yield spike as a result, the transmission into the real economy is also likely to be muted", as 90 per cent of Thai corporate financing is bank-based, he said.

More losses and volatility may be in store for the baht because of domestic factors, according to the central bank's Monetary Policy Committee.

Separately, Thailand's Finance Minister Arkhom Termpittayapaisith said the government was open to raising a 60 per cent ceiling of the public debt-to-GDP ratio if needed and pledged continued fiscal support to small and medium enterprise hit hard by the pandemic. BLOOMBERG