Of course exports are vital to the economy of the Thailand

The Bangkok stock market has experienced, yesterday, its largest fall in fifteen years: 15. A descent into the underworld linked to the concerns of foreign investors after the decisions announced the day before by the Central Bank of Thailand to stabilize the course of the national currency, the baht ("Les Echos" from December 19): as of yesterday, local banks have been forced to block for a year, 30 of new deposits in foreign currency exceeding US $ 20,000except those related to exports. Investors who would absolutely recover their implementation before this period of one year is receive only two-thirds.

Before panic wind blew on the markets, the Thai authorities had to go back. Since yesterday evening, the Deputy Prime Minister and Minister of Finance announced that would be exempt from the new regulation foreign investments via the stock exchange. Irony of history, he said, the morning that the new measures were "the best ever taken" by the Bank of Thailand...

The comparison between this coup de torchon stock market and the Asian crisis of 1997 which had begun in Bangkok, however, seems little relevant: with reserves amounting to six months of imports, the Thailand is not financially beleaguered.

Speculative transactions

Nevertheless. The inflation of 14 of the baht since the beginning of the year (the highest increase of all currencies in Asia) for an economy dependent on 65 of exports has concerns about the monetary authorities. As speculative operations have tended to accelerate these days. Hence the idea of hitting fort in preventing capital inflows in the short term.

More than the decision to respond, it is probably the brutality of this reaction of the Central Bank appears in issue. The partial control of foreign currency entries allowed that a small drop of the baht. And the fall of the stock market confirmed the analysis of the economists who were stigmatized too radical, although relevant measures in their objectives. A point of view summary by Teerana Bhongmakapat, an economist at Chulalongkorn University, in the Thai daily The Nation". For the latter, instead of block 30 of new deposits, the Central Bank should have simply "3 to 5 to reduce the impact of a drastic measure."

The reaction of the stock exchange Bangkok, today, is expected to know if the business community are reassured. But this episode illustrates the hesitations of the policy of the new regime, resulting from the coup d'etat of September 19, including on the question of the baht. Of course, exports are vital to the economy of the Thailand. But, as an economist in Bangkok post explains, "Thai exports were not really in a critical situation." Evidenced by the fact that the trade balance, after having been negative in 2005, is close to the balance for 2006. For a long time, the Central Bank is therefore permits, not without reason, to remain deaf to the complaints disabled Thai exporters who considered themselves by the rise in the baht.

Dual responsibility

In a sense, the Central Bank is even doubly responsible for his change of attitude suddenly. Because if the increase of the baht against the dollar is stronger than other Asian currencies, it is, explains the same economist, "because the differential is strong between interest rates and the level of inflation." While it has declined significantly since the middle of the year, the Central Bank refused, at the last Steering Committee on 13 December, lower interest rates, on the basis of hypothetical risk of inflationary slippage. Since then, international investors poured, speculating on the rise in the baht at the grow program Institute to use the major means to correct shooting (read also page 38).