Tough BoT job for Sethaput

Tough BoT job for Sethaput

Sethaput the right BoT pick

With his extensive experience in economic affairs, Sethaput Suthiwart-Narueput's appointment as governor of the Bank of Thailand (BoT) -- where he will be tasked with the demanding job of dealing with a flagging economy that has yet to recover from the Covid-19 crisis -- seems a suitable choice by the government.

Mr Sethaput, 55, is one of the two finalists who won the cabinet's endorsement on Wednesday. He is to replace the incumbent Veerathai Santiprabhob, the central bank's 23rd governor, whose term ends in September.

His strong background and credible track record as an economic strategist in both the public and private sectors is well recognised.

This is not the first time Mr Sethaput has had to deal with an economic crisis. Back in 1997, during the Asian financial crisis, Mr Sethaput left the World Bank where he worked as a senior economist and joined a team negotiating a financial bailout for the country from the IMF. The team was led by then finance minister Tarin Nimmanhaemin.

Mr Sethaput's experience as part of the economic team tackling the 1997 crisis is relevant as Thailand navigates the economic downturn resulting from Covid-19. Yet he should be aware that current economic conditions are very different from what he coped with two decades ago.

So far, the BoT has cut the policy interest rate to 0.25%. Hence, the leeway for monetary policy measures is now limited, while household debt has skyrocketed to about 80% of gross domestic product (GDP).

In 1997, the economic crisis was triggered by problems in the banking and financial sectors. In contrast, this year's Covid-19 crisis has directly hit the "real" sectors, such as those in the goods and services industries which usually create large amounts of jobs.

Disrupted international logistics and travel due to the global lockdown will prolong the economic hardship. That is unfortunate for Thailand as the economy relies heavily on exports and tourism, all of which account for over 70% of the nation's GDP. Unemployment could rise much higher than during the 1997 crisis.

Another key challenge for the new central bank governor is how to deal with the appreciation of the baht which could worsen the export outlook. The BoT has limited abilities to manage the currency as interventions may prompt the US to add Thailand to its watchlist of currency manipulators.

Meanwhile, the fact that Thailand is in transition towards becoming an aged society means it will face severe labour shortages and reduced productivity.

Demographic changes, which will see increasing numbers of elderly and a declining proportion of people in work, will make it difficult to seek a balance and achieve financial and fiscal stability, affecting investments and savings, economic growth, social security, and sustainable natural resources management.

The top central bank role will understandably be tough with regard to political pressure, largely because ministries in charge of economic affairs are controlled by different coalition parties, each with their own agenda. Nonetheless, Mr Sethaput will have to maintain his principles and act in the interests of the public.

Becoming the BoT governor in such times is a tough job and Mr Sethaput will have to live up to high public expectations.

While he has many challenges to overcome, it's a chance to set new milestones for the central bank and Thailand.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

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