Prime Minister Srettha Thavisin asked the Bank of Thailand (BoT) to urgently hold an unscheduled meeting of its Monetary Policy Committee (MPC) to cut interest rate, saying the latest data indicated that the country's economy was in a crisis.
"I would like to implore the MPC to urgently call a committee meeting to consider reducing interest without waiting for a scheduled meeting," Mr Srettha posted on X, formerly known as Twitter, late on Monday.
Mr Srettha, also the finance minister, said the economic figures released by the National Economic and Social Development Council (NESDC) showed that Thailand's economy was in a critical stage. There should be an interest rate cut, he insisted.
The rate-setting panel headed by BoT governor Sethaput Suthiwartnarueput is not scheduled to hold its regular meeting until April 10.
Central bank chief governor Sethaput Suthiwartnarueput. (Photo: BoT)
The baht fell as much as 0.3% on news of Mr Srettha, also the finance minister, calling for an out of cycle MPC meeting to cut borrowing costs that are at a decade high. The currency has gone from being the best performer in Asia in the final quarter of 2023 to the second-worst this year as foreign investors continued to shun Thai assets.
"This call represents rising headwinds for the baht given the apparent escalation of pressure on the central bank to cut before the next meeting in April," said Moh Siong Sim, a currency strategist at Bank of Singapore Ltd. "The baht is likely to remain under pressure in the near term amid a firm dollar backdrop."
While the BoT has not reacted to the latest gross domestic product (GDP) data, central bank officials have previously said they are willing to consider lowering borrowing costs if they are convinced that the weakness in the economy is persistent and not transitory. The rate-setting panel left interest rate unchanged at 2.5% on Feb 7, ignoring Mr Srettha's call for a 25 basis point cut.
GDP expanded 1.7% in the fourth quarter from a year ago, markedly weaker than the median 2.6% forecast by economists surveyed by Bloomberg, data released by the NESDC showed on Monday. Output shrank 0.6% quarter-on-quarter, against a forecast of 0.1% drop. For the full year 2023, the economy grew 1.9%, extending a decade of average sub-2% growth.
Thailand is currently witnessing a spell of disinflation, with consumer prices printing negative for four months since October. Factory output has shrunk for 15 months in a row as exports took a knock due to sluggish demand for automobiles, electronics and other products.
The tepid economic recovery also bolsters the case for Mr Srettha's plan to shore up growth with a 500-billion-baht (US$13.8-billion) in cash handouts to citizens to boost consumption — an idea that has been criticised by economists and the central bank as inflationary and one that poses a risk to fiscal consolidation.
Since November last year, Mr Srettha has repeatedly said since November last year that Thailand's economy was in crisis, stressing the need to forge ahead with his government's controversial digital money handout scheme.
