PM Srettha urges bank of Thailand to consider interest rate cut

Prime Minister Srettha Thavisin expressed his concerns to the Bank of Thailand’s (BoT) Monetary Policy Committee (MPC), suggesting an urgent meeting to discuss a potential cut in interest rates, rather than waiting until the scheduled April meeting.

Following a recent Cabinet meeting, PM Srettha clarified that he hadn’t imposed any pressure on the secretary-general of the National Economic and Social Development Council (NESDC) to influence the central bank’s decisions.

The 62 year old PM urged for a meeting to consider the reduction in interest rates in light of the new information from the NESDC.

“Being independent does not mean you can ignore people’s hardship.”

The NESDC has recently made downward revisions to its GDP growth projections for 2023 and 2024, bringing them to 1.9% and 2.7% respectively. The secretary-general of NESDC, Danucha Pichayanan, has suggested the BoT implement financial measures to aid the economy, reported Bangkok Post.

These revised projections are lower than the previous ones, which estimated growth at 2.5% and within the range of 2.7-3.7%. Danucha proposed that the central bank should give serious thought to lowering the rates, particularly the net interest margin (NIM), currently high at around 5%.

The government has previously taken steps to stimulate the economy, support investment and expedite the disbursement of the state budget. As a next step, financial measures should be utilised for economic support, according to Danucha.

Debt burden

NESDC has called for financial institutions to reduce the NIM to alleviate the debt burden for small and medium-sized enterprises (SMEs) and households. The NIM doesn’t have a significant impact on large businesses.

Danucha also suggested the central bank continue its debt assistance measures by keeping the minimum repayment rate for credit card debt at 5%. The expiration of this deadline in December and the current rate of 8% could result in more non-performing loans (NPLs) among SMEs and householders.

Danucha reiterated his suggestion for the BoT to cut rates due to the economic figures being lower than NESDC’s previous forecasts and more special mention (SM) loans, defined as loans overdue for 1-3 months, turning into NPLs.

“The NESDC should hold talks with the BoT.”

Danucha stated that the prime minister had not exerted any pressure on the NESDC.

On February 7, the MPC decided to keep its policy rate at 2.5% and reduced its 2024 growth projection to 2.5-3%. MPC secretary Piti Disyatat indicated that the economy is expected to slow down in 2024 due to reduced exports and manufacturing activity amid softening global demand and moderating growth in China.

PM Srettha disagreed with the decision to maintain the policy rate at a 10-year high of 2.5%.

“I want fiscal and monetary policy to work together, but I have no power to interfere with the bank’s duties.”