Exclusive-Thai central bank chief says current policy rate neutral, economy not in crisis

BANGKOK : Thailand’s current policy rate is broadly neutral and the country’s slower-than-expected economic growth forecast for this year did not constitute a crisis, its central bank chief told Reuters on Tuesday.

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput said he had no concern about negative inflation and the country’s economic problems were due to structural issues and would not be solved by quick stimulus measures being pursued by the government.

The government of Prime Minister Srettha Thavisin, a real estate mogul and political newcomer, has described the country’s sluggish economy as being in “crisis”, and aims to give it a jumpstart with his signature 500 billion baht ($14.05 billion) digital handout scheme to boost consumption.

“What we’re seeing is a recovery that is there, but is slower than expected. That’s not the same thing as a crisis,” Sethaput said in an interview.

“If you want to raise the long-term potential growth rate, you’ve got to do the structural stuff. You’ve got to get productivity up. But the way to get there is not just by engaging in short-term stimulus type measures.”

Earlier on Tuesday, the finance ministry sharply downgraded its 2024 economic growth projection to 2.8 per cent from 3.2 per cent and cut its estimate for 2023 growth to 1.8 per cent from 2.7 per cent, bolstering the government’s case for stimulus to revive the economy.

Srettha last week said his government would move ahead with its flagship handout scheme, which would transfer 10,000 baht ($281) each to 50 million Thais via a mobile app to spend within six months, though it may be delayed. His deputy said there was no back-up plan if it could not be implemented.

The central bank left its policy rate unchanged at a decade high of 2.50 per cent in November, having raised it by 200 basis points since August 2022 to curb inflation. It will next review policy on Feb. 7.

Premier Srettha has openly disagreed with the central bank’s current policy stance, saying it is hurting the economy. Earlier this month he met the central bank chief to urge him to cut interest rates, the second such meeting.

Sethaput said the recent meeting with Srettha was “cordial” and it was part of his job to withstand criticism, adding it was important to maintain central bank independence.

He said he expects negative inflation in January, February and possibly March, adding the economic growth path had been softer than expected, while justifying the current interest rate position.

“There are only two countries in the world … that have lower policy rates than us. And that’s the Japanese and the Swiss,” he said.