The Bank of Thailand should take into account the risks the country’s economy faces, including its fragile recovery, when deciding monetary policy, according to Prime Minister Srettha Thavisin.
Decade-high borrowing costs at 2.5% “may affect the nation’s economic recovery and the well-being of the people”, Mr Srettha said in a speech to parliament at the start of the budget debate on Wednesday.
The 3.48-trillion-baht budget for the 2004 fiscal year to Sept 30 will entail a deficit of 693 billion baht, an increase of 100 billion baht from the deficit projected by the previous government in a preliminary draft.
The Bank of Thailand has raised its benchmark repurchase rate by a total of 200 basis points over a 13-month tightening campaign based on the assumption of a “good” economic recovery, the premier said.
But inflation, which is forecast to fall for a third straight month in December, is a reflection of a slowing domestic economy, he said.
“The monetary policy going forward should be in line with the economic trend, tighter financial conditions and additional boost from the government policies,” Mr Srettha said.
On the fiscal side, he said, incurring a budget deficit would help support the economy.
The premier has repeatedly said the economy is in crisis and dismal domestic activity has prompted the Pheu Thai Party to push for a 500-billion-baht digital cash handout programme, which has been criticised by some central bankers and economists.
Mr Srettha, who said last year that he wanted to accelerate annual growth to 5% during his term, said on Wednesday that gross domestic product expansion this year would likely be between 2.7% and 3.7%, compared with an estimated 2.5% in 2023.
Southeast Asia’s second-largest economy faces multiple challenges including the impact from El Nino, high household debt, slowing global trade and geopolitical tensions, he said.
The BoT, which in November left its policy rate unchanged, will hold its first rate-setting meeting of the year on Feb 7. The government is scheduled to report full year 2023 GDP on Feb 19.