Thai central bank has tools to handle strong baht - Fin Min

* Says monetary, fiscal policy must work together

* Says Q4 GDP should be better than Q3 on govt stimulus

* Central bank says to encourage outflows to ease baht

BANGKOK, Nov 16 (Reuters) - Thailand’s central bank has the necessary policy tools to handle the strengthening of the baht , the finance minister said on Monday, as the currency hit its highest level in more than 10 months against the U.S. dollar.

The baht’s strength has been driven by foreign inflows, partly due to optimism over the fundamentals of Southeast Asia’s second-largest economy, Arkhom Termpittayapaisith told reporters.

After discussing the baht with the Bank of Thailand, Arkom said the central bank should have the policy measures to manage it.

“In managing the baht, monetary policy and fiscal policy must go together... and what to be aware of during capital inflows is speculation,” Arkhom said.

Governor Sethaput Suthiwartnarueput told his first briefing last month that central bank would encourage capital outflows to help ease pressure on the baht as the policy interest rate was already low with limited room to fall further.

The central bank is expected to keep the key rate unchanged at a record low of 0.50% when it meets on Wednesday.

The baht was trading at 30.19 per dollar at 0550 GMT, having hit 30.13 in earlier trade, the strongest since January.

Arkhom said the economy in the fourth quarter should perform better than the previous quarter following government stimulus to bolster consumption.

In the third quarter, gross domestic product declined a less than expected 6.4% from a year earlier, while posting better than expected 6.5% growth on the quarter as domestic activity improved after coronavirus curbs were eased.

That prompted the state planning agency to raise its 2020 economic outlook to a 6% drop from a previous forecast for a 7.3-7.8% contraction. ( Writing by Orathai Sriring Editing by Ed Davies)