- By Pooky, Thai Intel’s economics journalist
- The Clash:
There appears to be a clash between fundamental analysis and technical analysis, in the management of the Thai economy between the Thai central bank focus on fundamentals and the Thai finance ministry focus on technical analysis.
“The central bank should be more anticipatory of the future events,” says the Thai finance minister-pointing out flooding and global economic environment. Meanwhile, the Thai central bank chief says, fundamentally, Thailand is growing at a too high inflationary point-and should take on no risk from a government stimulus package.
The underlying philosophy, of the difference between the Thai Central Bank and Thai Government, however, relates to the question of how best to address “A Volatile Environment?”
- Fundamental vs Technical Analysis:
The concept of a country as a corporation, have died in popularity, because of the question about stake-holders-but the fact is, countries increasingly are similar to “Modern Businesses.”
As with most businesses, the company is run by a management team-supported by the finance department-that in modern times-that finance department relies a great deal on both fundamental analysis and technical analysis. Fundamental is about the basic modeling of the business finances and technical analysis, is about charting the future of the business.
The most competitive companies use both fundamental and technical analysis together-with one supporting the other. For example, those in the oil industry, will look at, for example, the fundamental demand and supply of oil, and yet, it will also look at the technical analysis, to project future price movements. Or exporters, will look at fundamentals like income and expense, but also at the technical analysis of currency movements.
- Thai Central Bank Track Record:
In Thailand, however, most of the problem arguably stems from the Thai central bank economic model-as the Thai central bank have been making major critical mistakes.
- For Example:
As emerging markets cool off towards tightening to curb inflation, in response to slower global growth, the Thai Central Bank continues to fear inflation-and as many emerging economy have indeed shifted to growth-the Thai central bank, again, continues to criticize the Thai government to curb its stimulus.
On inflation itself, as the Thai Central Bank projects higher and higher, the latest figure, sees an easing off in Thailand-in what several local press reports as having “Broke the Pen” of many analysts.
Then the Thai Central Bank massively underestimated the damage from the flooding-saying only about US$ 500 million damage would be done, when in fact it is projected to be in the US$ billions and erasing 0.5 to 1% from the GDP.
Then one after another cutting-edge economist in Thailand and regionally, have started to lower their Thai GDP estimates, for both this year and next year, falling off the cliff from the Thai Central Bank estimate.
- Little Credibility with the Government:
That track record, of a failing economic model used by the Thai Central Bank, have cause the government, that is managing the economy with the future as an objective, to come out to criticize the Central Bank.
The Thai government is targeting to add 1 to 2% on the baseline GDP from its stimulus policies-however, that objective, increasingly is looking un-likely, as the Thai Central Bank continues to rely on its, arguably flawed, fundamental economic model.
The situation is made worse by the traditional argument about Monetary and Fiscal policies-where mostly, a country’s monetary policy is in the hands of the Central Bank and the fiscal policy is in the hands of the government.
However, from some of the facts mentioned above, it is clear that the Central Bank have crossed into the fiscal territory of the government-and in fact, have gone much further, for example, in criticizing the government’s plan to re-structure the Thai economy to rely more on the Thai-internal engine of growth-away from exports.
Meanwhile, the government, and much of the Thai business community, is calling on the Thai Central Bank, to go beyond stopping the increase of interest rates, and reverse the policy and start easing.
The Following is from the Bangkok Post:
Thirachai critical of central bank
• Published: 7/10/2011 at 04:00 PM
• Online news:
The Bank of Thailand‘s Monetary Policy Committee members are not working with their heads and they should stop relying on statistics when making decisions, Finance Minister Thirachai Phuvanatnaranubala said on Friday.
“The MPC members should focus on the big picture and anticipate what may happen in the future, and they should use more of their sixth sense, because the Thai economy is facing more risks, domestically and abroad.
“At present, they are relying on statistics, such as GDP and unemployment figures, and they are just keying in numbers and wait for the calculations to proceed. Anyone can do that and I can do that because it’s a no brainer,” Mr Thirachai said.
He said the financial policy of the government focused on economic risk abatement by raising agricultural income through the rice mortgage scheme, boosting domestic consumption through the 300-baht minimum daily wage policy, and increasing graduates’ starting salaries to 15,000 baht a month.
The first-home and first-car buyers’ tax rebate programmes will also help stimulate the economy, the minister added.
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