CAPITAL INFLOW "WOULD NEED TO BE STABILISED"

       The Bank of Thailand is becoming concerned over the potential level of capital inflow to Thailand and Asia next year, as recovery in developed countries remains fragile.
       The central bank is preparing measures to cope with an excessive capital inflow, which would drive up equity prices, strengthen the baht and create volatility in financial markets, BOT Deputy Governor Bandid Nijathaworn said yesterday.
       "Many people are interested in the potential of economic growth in Asia next year. Capital will flow into the region, including Thailand, which will boost stock prices, strengthen the baht and create volatility," he said. "Asset prices will go up to create wealth benefits. The cost of imports will also become lower. But we have to be cautious by trying to safeguard a balance in the capital inflow."
       Bandid did not spell out how the capital inflow would be stabilised in the event of a massive influx.
       He said the central bank was ready to look after the baht's stability and minimise volatility in order to help business operators. The private sector has a good understanding that the current volatility of the baht is due to external factors.
       There have been signs of a global recovery, but at the moment it looks fragile. Bandid said the authorities were closely monitoring economic conditions in the US, which would have an effect on Thailand.
       "The baht is enjoying great stability during this time," the deputy governor said.
       Although the government has introduced a series of stimulus programmes to bring about a recovery, confidence among the private sector remains subdued.
       "There is a risk that spending by the private sector may not recover at the same pace as government spending. We have to monitor the situation closely," Bandid said.
       Moreover, the BOT is ready to step in to help out small and medium-scale businesses, particularly in the tourism sector, that have been affected by the economic downturn.
       The authorities want to make sure these small operators have access to enough capital to continue their businesses, he said.