JSCCIB urges BoT to cut high interest rates amid economic threats

As the economy grapples with internal and external threats, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) called on the Bank of Thailand (BoT) to reduce interest rates. The high interest rates are causing a surge in borrowing costs, amidst a volatile recovery due to the global economic downturn.

These views were expressed by Sanan Angubolkul, chairman of the Thai Chamber of Commerce, and a prominent member of the JSCCIB, during a meeting on Wednesday, January 10, to discuss the economic forecast for 2024.

Coinciding with this appeal, Prime Minister Srettha Thavisin held discussions with the central bank governor, Sethaput Suthiwartnarueput, regarding the current interest rate, which has garnered criticism for being excessively high. PM Srettha had previously suggested the central bank initiate a reduction in borrowing costs. However, as he lacks the authority to influence rate decisions, he could only share his perspective with Sethaput.

The BoT has been steadily hiking its policy rate since August 2022, currently standing at 2.5%, the highest in a decade. This significant increase, from 0.5%, has caused businesses to grapple with escalating financial costs.

Furthermore, Thailand is battling a high level of household debt, which is undermining people’s purchasing power. The nation is also susceptible to the repercussions of geopolitical conflicts, reported Bangkok Post.

The ongoing conflicts between Ukraine and Russia and Israel and Hamas, along with the tension in the Red Sea, which could disrupt the global supply chain, were highlighted as potential threats by Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI). Kriengkrai stated that the global economy is anticipated to remain weak this year due to these numerous risk factors that could potentially impact the Thai economy, particularly its export sector.

Loan sharking

The FTI has previously expressed its concern over the high levels of loan sharking, accounting for 19.6% of household debt. Last year, it was estimated that household debt surpassed 90% of GDP.

The JSCCIB urged the government to establish a fund to assist businesses, especially small and medium-sized enterprises (SMEs) that are struggling for financial resources, according to Payong Srivanich, chairman of the Thai Bankers’ Association. Despite these challenges, the JSCCIB has upheld its forecast of key economic indicators for this year.

The committee anticipates Thailand’s GDP to experience a growth of 2.8-3.3%, with an expected expansion in exports by 2-3%. However, it has revised its inflation projection, now anticipated to fall within the range of 0.7-1.2%, a considerable drop from the previous estimate of 1.7-2.2%.