Prime Minister Srettha Thavisin and other senior ministers called for coordinated fiscal and monetary policy moves to pull Thailand’s economy out of a spiral of negative inflation and weak growth.
Mr Srettha, who is also the finance minister, said negative inflation reading for a fourth straight month in January was a definite sign of weakness in the economy. It’s also a reminder that fiscal policy, which is the domain of the government, and monetary policy, determined by the Bank of Thailand (BoT), should be synchronised, he said on X, a platform formerly known as Twitter.
“If everyone acted differently, it would be difficult to solve the problem” ailing the economy, Mr Srettha said.
The prime minister and some of his cabinet ministers have cited the string of negative inflation readings to argue that it was time for the BoT to start reducing borrowing costs. The central bank has resisted such calls, while justifying its decade-high rate as an essential buffer against potential global shocks.
The Monetary Policy Committee, which meets on Wednesday, will keep the rate steady at 2.5%, according to all 24 economists surveyed by Bloomberg as of Monday afternoon. The central bank lifted its benchmark rate by a total of 200 basis points in a tightening cycle that lasted little over a year before pausing in November.
The escalating tension between the government and the central bank has also weighed on the baht — Asia’s worst-performing currency after Japan’s yen this year — with foreign investors continuing to pull money from Thai stocks and bonds.
The high rate has been especially hard on the country’s small- and medium-sized enterprises and low-income groups, according to Srettha, who became prime minister in August. The Thai economy grew by an estimated 1.8% last year, missing most forecasts, according to the Finance Ministry. Meanwhile household debt has remained above 90% of gross domestic product and public debt has ballooned by half since 2019, to about 62%.
The negative inflation is worrisome and a short-term stimulus may be necessary to reverse the trend, Deputy Finance Minister Julapun Amornvivat said Monday, adding that the BoT’s rate panel should be obsessed about financial stability. Deputy Prime Minister and Commerce Minister Phumtham Wechayachai said the economy remains in a crisis, and financiers are increasingly concerned about a number of tranches of bond rollovers due shortly.
Mr Phumtham urged critics of government’s plans to stimulate the economy, including the so-called digital wallet plan, to rethink their positions.
Mr Srettha has also continued to push for a signature program unveiled during the election campaign — a cash handout to almost every Thai adult. However, the programme’s price tag of 500 billion baht, to be funded through borrowing, has drawn criticism from opposition parties and push-back from the central bank.