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Minister insists BoT has full independence
WICHIT CHANTANUSORNSIRI
Monetary and fiscal policies must go together if the economy is to move forward, according to deputy finance minister Suchart Thadathamrongvej.
The Finance Ministry and the Bank of Thailand over the past several months have been locked in a simmering conflict over the direction of economic policy.
The central bank insists that interest rates must rise to help clamp down on inflation, now at a 10-year high due to high food and oil prices.
But government policymakers say that raising interest rates will only increase the burden on businesses and consumers, and result in further pressure on consumption, investment and domestic growth.
The dispute has intensified market concerns about the independence of the central bank.
Dr Suchart, who holds advanced economics degrees from Canada's McMaster University and the London School of Economics, said the central bank was independent in its operations.
''But independence doesn't mean that it should follow policy in opposition with the government,'' he said, adding that the ministry would hold talks with the central bank on the issue.
The government ultimately held responsibility to the people for its management of the economy, Dr Suchart added.
In other countries, he said, central banks may speak out in opposition against a government's economic policies. ''But what does not happen is for a central bank to adopt policies counter to those of the government,'' Dr Suchart said.
The central bank's Monetary Policy Committee raised rates at its most recent meeting last month by a quarter-point to 3.5%, still among one of the lowest policy rates in the region. Most analysts expect rates to rise further by 0.5 to one percentage point over the next 12 months to stem inflation.
On the fiscal side, the government last month announced a 46-billion-baht package to cut excise taxes on fuel, offer free train and bus rides for the public and waive water and electricity bills for small households.
The six-month programme is expected to increase economic growth this year by 0.8 percentage points while also moderating inflation.
The University of the Thai Chamber of Commerce yesterday said the anti-inflation package would help lift economic growth to between 5.5% and 6% this year, up from earlier estimates of 5% to 5.5%. Growth last year was 4.8%.
Inflation for the full year was projected at 6.8% to 7.2%, down from earlier estimates of 7.2% to 7.3%.
UTCC economist Thanavath Phonvichai said lower global oil prices would also help ease inflationary pressure on the economy. Agricultural commodities prices are expected to stay high through the end of the year, helping boost farm income.
Export growth forecasts were also increased to 18% to 20% from earlier estimates of 15%. First-half exports totalled $87.21 billion, up 23.1% from the same period last year.
Mr Thanavath forecast growth next year at 5.5% to 6.5%.
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