Chamber of Thailand calls for cut in interest rates to boost recovery

The Thai Chamber of Commerce (TCC) expressed its expectations for the Bank of Thailand to consider a reduction in interest rates in its forthcoming meeting. The TCC argues that although the economy is on a recovery trajectory, it remains susceptible to various challenges.

Sanan Angubolkul, the chairman of the chamber, acknowledged the decisions made by the Monetary Policy Committee (MPC) of the central bank to hold its policy rate at 2.5% during its previous meeting. Nevertheless, the TCC suggests that the MPC should contemplate lowering interest rates in the subsequent meeting, which would help alleviate the financial burden on the public and businesses. This move could also potentially mitigate the risk of an increase in non-performing loans, reported Bangkok Post.

The TCC further advised the Bank of Thailand to implement new measures that would facilitate easier access to funding for businesses. According to Sanan, such steps are integral to enhancing domestic purchasing power and maintaining the momentum of the economic recovery.

“The private sector sees that although the overall outlook for the economy this year shows signs of recovery, supported by the rapidly recovering tourism sector, there are still vulnerabilities. Domestic purchasing power has not yet fully rebounded while the manufacturing sector shows a contracting trend.”

He further elaborated on the various geopolitical issues and upcoming elections in numerous countries that could potentially result in significant policy changes. These include the impact of the Israel-Hamas conflict, which has led to an increase in shipping costs and affected energy prices, alongside unrest in neighbouring countries and heightened competition with Chinese products in the regional market.

Sanan also pointed out that businesses are currently under pressure from relatively high-interest rates, which directly impact their operating costs, while the public is burdened with high levels of debt due to sustained borrowing.

Sanan highlighted the fact that the inflation figures had declined for four consecutive months, partially due to technical adjustments after the government’s policy to reduce the cost of living related to energy. This decline further underscores the vulnerability of domestic purchasing power.

The MPC, in its recent meeting, chose to maintain its policy rate at 2.5% and to reduce its growth projection for 2024 to a range of 2.5-3%, a decrease from its previous projection of 3.2%. The central bank has maintained its policy rate at 2.5% for two consecutive meetings.