Thailand urges c. bank to cut rates

Thailand’s Commerce Minister, Pichai Naripthaphan, reignited the debate over monetary policy, urging the Bank of Thailand (BOT) to take action on the strong baht and cut interest rates.

Minister Pichai expressed concerns about the appreciating baht, which he believes is hindering export growth. He argued that the BOT should intervene to weaken the currency and also reduce interest rates to boost liquidity.

This stance reflects an ongoing disagreement between the government and the central bank regarding monetary policy.

On Monday, the baht reached its strongest level against the US dollar in over 18 months. This strength coincides with a sluggish export performance.

Despite the government maintaining its full-year export growth target of one to two per cent, export figures for January-July 2024 only showed a 3.8 per cent increase compared to the same period last year.

Meanwhile, the BOT has held its key interest rate at 2.50 per cent for five consecutive meetings, maintaining a neutral policy stance despite government pressure for a reduction. The next rate review is scheduled for October 16th.

The government, led by the Pheu Thai party, advocates for lower interest rates to complement its planned fiscal stimulus package. This stimulus aims to revitalise Thailand’s economy, the second-largest in Southeast Asia.

The government’s flagship programme, a “digital wallet” initiative, is set to launch later this month. The first phase will distribute 145 billion baht ($4.4 billion) to vulnerable groups.

The entire stimulus programme aims to allocate 10,000 baht each to 50 million Thais, encouraging them to spend locally.

However, this programme has faced criticism from economists, including former central bank governors, who consider it fiscally irresponsible. While the government rejects this view, it has encountered difficulties securing funding for the programme.

Attribution: Reuters

Subediting: M. S. Salama