Persistent US financial crisis to affect Thai liquidity, exports

The financial crisis in the United States, if it persists, will put pressure on Thailand's liquidity and exports, according to a leading banker.

Kobsith Silapachai, executive of Kasikornbank's Economic Research and Capital Market Division, said the rejection by the US House of Representatives of the US$700 billion financial bailout plan will make the US economic crisis drag on.

The situation will affect liquidity in Thailand because US investors need to bring their funds to their country to address the ongoing liquidity crunch.

In addition, it will impact the export sector since payment settlements may be delayed due to a lack of confidence on the part of commercial banks.

In the short run, he said he sees the baht weakening because of capital outflows. The currency's exchange rate is expected to remain at around 34 to the US dollar this year.

Mr. Kobsith also forecast the Bank of Thailand's Monetary Policy Committee will maintain the policy interest rate at 3.75 per cent at its meeting on October 8 since it wants to wait for a clear direction of the crisis.

He advised the central bank to prepare to inject money into the financial system because the situation remains volatile.