HONG KONG - Interest rates in Thailand are “too high”, hurting people’s standard of living and weighing down the economy, says Deputy Finance Minister Julapun Amornvivat, who urged the Bank of Thailand to consider easing monetary policy.
“It is too high considering the spending power that the Thai people have at the moment,” Mr Julapun said in an interview with Bloomberg Television on Wednesday. “I hope that they can realise the burden that’s been put on Thai people and reduce the rate. I hope that they will do it soon.”
Mr Julapun is the latest to join the chorus of calls for a rate cut, following Prime Minister Srettha Thavisin, who is also the finance minister.
The Bank of Thailand has pushed back against the appeal saying the rate was appropriate. Central bank governor Sethaput Suthiwartnarueput this week doubled down on the pushback, saying the economy may be growing slowly but it is not a “crisis” as Mr Srettha has maintained.
Mr Sethaput said short-term stimulus as championed by the prime minister will not do much for the economy, which needs fundamental structural reform.
Despite the two men’s claims that their relationship is cordial, the policy disagreement that began shortly after Mr Srettha took office in August risks deepening a slump in the baht and the stock market.
While the government recognises the independence of the Bank of Thailand, it is concerned about borrowing costs hovering at a 10-year high holding back the economic recovery, Mr Julapun said.
In the end, he said, it is the central bank that will decide the level of interest rates and the government will do all it can to stimulate the economy. The next rate meeting is on Feb 7. The current policy rate is 2.50%.
Gross domestic product growth in Thailand has averaged below 2% in the past decade, trailing its neighbours. Last year, GDP growth was estimated to have slowed to 1.8% even as a recovery in tourism, a key pillar of the economy, began gathering pace. At the same time, inflation has been negative for three consecutive months, bolstering Mr Srettha’s calls for lower interest rates.
Mr Julapun, who is attending the Asian Financial Forum in Hong Kong, said he was also concerned about the baht’s volatility, with the currency having “moved too fast and unpredictably”. It’s the central bank’s job to stabilise it, he said.
He also confirmed that the much-touted digital wallet, a 500-billion-baht cash handout plan seen as a pillar of the government’s economic strategy, will be delayed from an earlier targeted roll-out date in May to sometime within the year.
Mr Julapun acknowledged that the programme has been held up by some issues that have to be clarified, including how it will be financed, but he assured it will be on track.
The plan is to issue local-currency bonds of different durations once a law is in place to fund the handout, he said.
“Right now the economy is in bad shape,” he said. “So the government believes it is imperative that we need to inject money into the system so that people can have a better lives.”
The baht has gone from the best-performing Asian currency in the fourth quarter to among the biggest losers this year, while the benchmark Stock Exchange of Thailand index dropped to a three-year low this week.
Foreign investors have been net sellers of 23.8 billion baht so far this year, after outflows of 192.5 billion last year.
By rolling out stimulus measures including reviving tourism, boosting infrastructure and foreign investment, Mr Srettha is targeting to lift annual GDP growth to 5% within his four-year term. Mr Julapun acknowledged that will be difficult to do that this year.
Tourism remains a bright spot for Thailand, with authorities targeting foreign tourist arrivals to jump to as high as 35 million from 28 million last year, Mr Julapun he said. Of that, about 8 million are expected to come from mainland China this year, up from 3.5 million in 2023.
“We are trying our best to bring Thailand back to its feet, to get to the number that we hope for, the GDP growth of 5%,” Mr Julapun said.