Quantitative easing (QE) is a form of unconventional monetary policy, which is typically used by central banks of major countries, including several nations in Asia, in helping address their economic woes after having to cut their policy rates to near zero percent. The details and size of asset purchase program under QE vary depending on the nature and context of the financial and economic systems of a country.
For Thailand, there is little room for policy rate cuts. As the Thai economic recovery remains uncertain and will likely take a while, monetary and fiscal accommodative measures will continue to be imperative in helping ease the impacts from economic problems and supporting mechanisms of various economic sectors so that they can fully bounce back to normalcy. Given this, it might be necessary for the relevant Thai authorities to explore new monetary tools to support their monetary policy mechanism.
Having specifically assessed the asset purchase measure, KResearch is of the view that, in legal terms, the asset purchase measure or QE can be implemented in Thailand, but a rationale and details of this measure must be clearly communicated to the general public. Emphasis must also be placed on whether QE is suitable for the Thai economic system, or not, particularly in maintaining the stability and confidence in the Baht. Additionally, QE may not be effective in addressing problems within the current Thai economy and business sector because the crux of such problems may not stem from the level of liquidity in the financial system, but appropriate and timely distribution of liquidity to the sectors that are in more need. Currently, such sectors are being beset by income shortfalls and excessively high credit risk. Therefore, other liquidity and loan assistance measures might be more effective at this time.