No Surge of Funds Into Asia From QE3: Thai Central Bank
The U.S. Federal Reserve is widely expected to announce a third round of quantitative easing (QE3) later Thursday, but it is unlikely to result in huge capital inflows into Asia, the Bank of Thailand’s Governor Prasarn Trairatvorakul told CNBC.
The last two rounds of easing in 2009 and 2010 saw inflows of $66 billion and $96 billion into Asian assets respectively, according to data from the Asian Development Bank (ADB).
While Prasarn said some amount of the liquidity that the Fed may inject into the system will “spill over” to other parts of the world, including Asia, the impact will not be as strong this time around.
“This time, we don’t think it will be as serious, as strong as in QE2,” he said on CNBC Europe’s “Squawk Box” on Thursday. “Two, three years ago, the outlook for Asian economies was very bullish, whether it’s China or Southeast Asian nations, hence, it attracted lots of fund flows….Probably not this time.”
Prasarn’s comments come at a time when expectations are increasing that the Fed could take action as soon as Thursday to boost a U.S. economy that is struggling amid poor jobs growth.
Economists polled by Reuters earlier this week now think there’s a 65 percent chance that the Fed will announce a third round of bond buying, up from 60 percent in August’s poll.
In 2010 when the second round of easing was announced, Asia was on way to a strong recovery from the slowdown brought on by the 2008 global financial crisis and was on track to grow 8.2 percent, up from the 5.4 percent recorded in 2009, according to the ADB.
This year, however, the economic environment is very different given the slowdown in China and India. The ADB has revised its 2012 growth estimates for Asia to 6.6 percent, down from 6.9 percent estimated in April.
According to Prasarn, Thailand’s economy, which is still recovering from the devastating floods that hit large parts of the country last year could grow close to 6 percent in 2012 after expanding 0.1 percent in 2011.
—By CNBC’s Jean Chua.