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News: Boost needed for Thailands sagging housing market

Fri, 30 Mar 07

Thailand's benchmark interest rate must be lowered to encourage consumer spending and spur the slowing economy, reports Bloomberg...

Finance Minister Chalongphob Sussangkarn observed: “Everybody knows that interest rates will go down. People have stopped buying consumer durables, sales of cars have gone down, housing loans have gone down”. 

In an interview in Bangkok on March 23, Chalongphob added: “Why would they buy today when they can wait maybe a couple of months when rates become lower, then they can get cheaper loans”.

The International Monetary Fund cut its growth forecast for Thailand last week and said the government needs to increase spending to boost growth. Chalongphob, who joined Thailand's junta-backed Cabinet earlier this month, aims to spur the economy by restoring consumer and investor confidence and speeding government spending.

Urgent need to restore consumer confidence

Aathira Prasad, a Singapore-based economist at DBS Group Holdings Lt said: “The finance minister's most urgent tasks are to restore confidence and get people to spend money. There is a lot of uncertainty about how everything is going to pan out, and people are not willing to spend”.

The IMF cut Thailand's economic growth forecast for this year to 4.5 percent - the second reduction in six months. The economy grew 5 percent last year as the strongest baht in nine years erodes overseas sales.

Tighter laws on foreign ownership.

“The economy is facing a confidence crisis,” said Thanavath Phonvichai, an economist at University of Thai Chamber of Commerce. “Government spending and lower interest rates won't be in time to spur consumption and investments in the second quarter. Growth in the first half will be very weak”.

Among other measures, Chalongphob also proposed tighter laws on foreign ownership will probably be “weakened” as previously suggested amendments are “too extreme”. Amendments to the Foreign Business Act are being reviewed by Cabinet.

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