Thailand’s interest rate levels are appropriate for current conditions and are neutral, the World Bank said on Wednesday.
The country faces temporary disinflation, but no deflation, said Kiatipong Ariyapruchya, the World Bank senior economist for Thailand, adding that it was normal for the central bank to have different views from the government.
He was referring to months-long campaign by Prime Minister Srettha Thavisin to persuade the Bank of Thailand to cut interest rates by 25 basis points, arguing the economy was in a “crisis” — a characterisation that the central bank rejects.
The BoT has so far resisted government pressure to reduce borrowing costs by holding rates at 2.50%, the highest in a decade. Its Monetary Policy Committee will hold its next meeting on April 10.
Central bank governor Sethaput Suthiwartnarueput has called the disagreement with the government a “creative tension”, contending that rate cuts would not help the economy substantially because of inherent structural problems.
Mr Srettha, who is also finance minister, has said rate cuts were suitable because of low inflation.
The February consumer price index dropped for the fifth straight month, falling 0.77% from the same month a year earlier.
“This is disinflation, which is a temporary effect,” Mr Kiatipong told reporters in Bangkok, adding that the World Bank is forecasting that inflation would return to normal.
The government’s plan to give away 10,000 baht to 50 million Thais to be spent in their local communities via a digital wallet would help boost gross domestic product (GDP) by 1 percentage point, said Mr Kiatipong, but would also increase debt by 3 percentage points.
The World Bank proposes more targeted measures, he said.
In a related development, a leading business group says it is sticking with its forecast that the economy would grow by between 2.8% and 3.3% this year.
Exports, a key driver of the economy, are projected to rise by 2-3%, in line with a previous forecast, said the Joint Standing Committee on Commerce, Industry and Banking.
The economy grew by 1.9% last year.
The committee was maintaining its forecasts for improved growth because the government budget would be disbursed in the second quarter after a lengthy delay, buoying the economy, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries.
Growth would also see improvement in the second half the year due to improving tourist arrivals, he added.
The group expects 34 million to 35 million foreign arrivals this year, up from 28 million last year.