Thailand’s Central Bank Chief Defends Policy

Thailand’s central bank governor, Sethaput Suthiwartnarueput, defended the bank’s current policy rate, stating that slower-than-expected economic growth does not constitute a crisis. Prime Minister Srettha Thavisin had urged the central bank to cut the policy rate, currently at a decade-high of 2.50%, to stimulate the economy. The governor emphasised that the country was not facing a deflationary situation and cautioned against relying solely on short-term stimulus measures. The government’s proposed 500 billion baht ($14 billion) digital handout scheme aims to boost consumption but has faced disagreements with the central bank.

Sethaput noted that structural reforms and increasing productivity are necessary for raising the long-term potential growth rate. The central bank chief characterised the recovery as slower than expected but emphasised that it does not constitute a crisis. The disagreement between the government and the central bank highlights the challenges in balancing short-term stimulus measures with long-term economic reforms.

Prime Minister Srettha’s government has described Thailand’s economy as being in a “crisis,” emphasising the need for the digital handout scheme. However, the central bank governor maintains that the country’s economic situation does not warrant crisis terminology. The central bank’s policy rate has remained unchanged since November, with a 200 basis point increase since August 2022 to address inflation concerns.

Sethaput acknowledged the recent meeting with Prime Minister Srettha, describing it as cordial, and emphasised the importance of maintaining the independence, trust, and credibility of the central bank. Despite the disagreements, the governor remains committed to the central bank’s role in economic policy.