Bank of Thailand resists calls for policy adjustments amid economic slump

The Bank of Thailand (BoT) countered government calls for monetary policy adjustments to stimulate the country’s slumping economy. Piti Disyatat, BoT Assistant Governor, stated today, January 15, that interest rates, already quite low compared to global standards, are not the solution to an economy being pummelled by external factors like dwindling global demand.

Piti emphasised that the country’s lacklustre economic recovery is a complex issue that cannot be easily resolved with superficial solutions. He argued that comprehensive treatments need to be tailored to address the root causes of the economic struggles.

This response follows Prime Minister Srettha Thavisin’s meeting with BoT officials last week, where he urged for a policy rate cut. The current rate sits at a decade-high 2.50%. Despite escalating it by 200 basis points since August 2022 to combat inflation, the rate remained unchanged in November. The next policy review is scheduled for February 7.

The 61 year old Thai PM, intent on jumpstarting the economy with numerous stimulus measures, voiced concerns about the population and businesses suffering under high rates. His deputy has criticised the BoT’s rate increases as “a bit too fast, too aggressive.”

Thailand has seen negative headline inflation for three consecutive months up to December, marking it as the eighth straight month it fell short of the BoT’s target of 1% to 3%. The BoT predicted a headline inflation of 2.0% this year and 1.9% in 2025.

However, Piti refuted that falling prices indicate deflation, attributing the negative inflation to government subsidies. He forecasts a more balanced growth in 2024 and predicts inflation to remain negative until February but within the target range for the year.

PM Srettha described the Thai economy, which relies heavily on manufacturing, domestic consumption, exports, and tourism, as being in crisis. In a bid to alleviate this, his government has introduced measures such as farmer debt suspensions, a minimum wage increase, and a notable US$14.3 billion handout scheme.

Piti maintains that Interest rates cannot give us more sophisticated, high-tech exports or the ability to increase the attractiveness of tourism. He stated the BoT aims for a neutral key rate and is prepared to adapt its monetary policy stance contingent on economic changes, reported Bangkok Post.