Government revenue collection has missed the target, signalling an economic slowdown, largely attributed to diminished purchasing power caused by high interest rates, says permanent finance secretary Lavaron Sangsnit.
Higher interest rates have affected people's purchasing ability, particularly those looking to buy cars or homes, Mr Lavaron said. While demand exists, people's ability to make monthly loan repayments diminished because of elevated interest rates, he said.
This led to some loan rejections by financial institutions, he said.
The decline in car and property transfers resulted in reduced government tax revenue, said Mr Lavaron.
He said reducing interest rates would help shore up the ailing economy and send a clear signal of government support.
If the economy continues to falter, more financial resources will be needed to revive it, he added.
Regarding fears about capital outflow due to interest rate reductions, he said this issue should not cause too much concern, noting that if capital were to flow out, it would likely have done so already, given the longstanding disparities in policy rates between Thailand and the US.
As for concerns that reducing interest rates could exacerbate domestic inflation, Mr Lavaron said there are no signs of inflation here, noting that lowering interest rates today would not necessarily have an immediate impact on the economy, as it may take more than six months to see its effects.
The Fiscal Policy Office (FPO) recently reported state revenue collection in the first four months of fiscal 2024 fell short of the target, attributed to a significant decrease in oil taxes.
The government collected net revenue of 824 billion baht in the first four months of fiscal 2024 (October 2023 to January 2024), 8.84 billion baht or 1.1% lower than projected.
The lower amount than expected was attributed to a cut in the diesel and gasoline tax rates during that period.
On an annual basis, the state's net revenue in the first four months of the fiscal year fell by 14.9 billion baht, or 1.8%, year-on-year.
According to the FPO, an additional 36.6 billion baht in special government income recorded during the previous fiscal year resulted in an elevated baseline.
If the special income is excluded, revenue collection in the first four months of this fiscal year grew 2.7% year-on-year.