(Bloomberg) — Thailand is replacing the top two officials steering the economy through its worst crisis ever, injecting more uncertainty into the policy outlook.
Finance Minister Uttama Savanayana resigned July 16 ahead of a Cabinet reshuffle, with Prime Minister Prayuth Chan-Ocha saying he’ll announce a likely replacement by next month. At the Bank of Thailand, the search for a successor to Governor Veerathai Santiprabhob is entering the final stages, although the Cabinet changes may delay that process. Veerathai, 50, has declined to seek a new term when his current one ends in September.
The upheaval comes at a time of heightened uncertainty in the global economy and a slump in export- and tourism-reliant Thailand that’s among the worst in Asia. The finance minister and central bank governor helped shape a 1.9 trillion-baht ($60 billion) stimulus package that’s meant to curb the economic fallout from the pandemic, and investors want to see those funds put to work.
“We are in a crucial time of transition from lockdown to resumption of business, so the continuation of key policies are very important to help the economy hit by the outbreak,” said Vasin Vanichvoranun, chairman of Kasikorn Asset Management Co. in Bangkok. The sooner the replacements are found “the better,” he said.
Somkid Jatusripitak, who was deputy prime minister in charge of the economy, also resigned alongside Uttama last week, another blow to the government’s management team.
Military Leader
Prayuth is set to make his first Cabinet changes since his victory in last year’s disputed election. A former army chief, he led a military coup in 2014 and ruled as the head of a junta for five years before returning at the head of a multi-party coalition after the vote. Uttama was recently replaced as leader of the largest political party in the coalition.
The political shake-up couldn’t have come at a worse time for the economy. The central bank expects gross domestic product to shrink 8.1% this year, the biggest decline on record and more dire than official forecasts for any other Asian nation. The central bank also is dealing with currency turmoil that’s undermining exports, and is examining new ways of supporting the economy as it runs out of conventional policy space.
After sharp gains since April, the baht has slid steadily this month amid weaker global sentiment. It’s down 2.6% against the dollar since the beginning of July, the worst performer in Asia after Indonesia’s rupiah.
Baht weakness illustrates market worries about the pandemic and the political upheaval, with the uncertainty weighing on financial market, consumer and business sentiment, said Tim Leelahaphan, an economist at Standard Chartered Plc in Bangkok.
The finance minister post is a key one market participants are watching. Prayuth said last week he’s waiting to hear from potential successors he has approached — some of whom are “outsiders” without political backgrounds.
One of the candidates he approached is a well-known banker, who has emerged as the possible front-runner for the post:
Radhika Rao, an economist at DBS Group Holdings Ltd. in Singapore, said the market is looking for “seasoned players” to take over.
“With the broad fiscal stimulus framework to fight the pandemic in place, the incoming finance minister will likely prioritize stabilizing growth through higher government support and demand, as external sectors require global recovery to also get underway as well as international borders to reopen,” she said.
The new finance minister will pick the next central bank governor from a shortlist of candidates. A selection committee received six applications for the position, including from two current deputy governors.
The likely front-runner, according to media reports, is a current member of the bank’s Monetary Policy Committee:
Investors are heartened by the fact that the likely replacements are well-known and qualified, but expect the road ahead to be a difficult one.
“What the newcomers need to deal with are real tough jobs,” said Win Phromphaet, chief investment officer of Principal Asset Management Co. in Bangkok. “The central bank has limited policy space and they will need to handle rising bad debts going forward, while the task of the finance minister, who will need to boost the economy after Covid-19, is also very difficult.”
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
