Economy not bad enough to warrant special MPC session, experts say
Many economic experts dismissed the premier’s call for the central bank’s Monetary Policy Committee to hold a special meeting, saying the state of the country’s economy does not warrant it.
Any monetary changes will only actually be felt in the economy six months later due to policy lag, said Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra.
“At the last MPC meeting, the votes came in at 5:2. The two votes in favour of lower interest rates did leave the door open for the Bank of Thailand [BOT] to cut the interest rate in April or June.”
The BOT has kept the interest rate unchanged at 2.5%.
Burin Adulwattana, chief economist at Kasikorn, pointed out that the Thai economy has yet to descend into a crisis. There needs to be a genuine crisis for a special MPC meeting to be called, such as the Covid-19 crisis, Burin said.
“The BOT has to be independent. Calling a special meeting would make investors question its independence,” he said.
Amornthep Chawla, chief of CIMB’s research office, said the budget for fiscal 2024 was a far bigger concern than lowering interest rates.
Parliament has yet to pass the budget bill, while NESDC numbers released on Wednesday show that public spending has dropped by 3%.
“If the public sector announced today that we are entering a fiscal vacuum, have exhausted all options and are therefore calling a special MPC meeting, then a rate cut is justified,” Chawla said. “However, we have yet to hear that and the government can still operate normally, so this ‘problem’ is essentially like tossing around a hot potato.”
The Thailand Development and Research Institute (TDRI), meanwhile, suggested that the Thai economy was recovering albeit more slowly than expected. The think tank was also concerned about seeing an unequal recovery (K-shaped) with blue-collar workers and SMEs facing challenges.
The slowdown seen in GDP numbers is due to delayed and contracted public spending, suggested Nonarit Bisonyabut, a TDRI research fellow.
He believes Thailand’s economic problems are concentrated in specific sectors and broad measures like the 10,000-baht digital wallet handout or lower interest rates would not help much.
“Personally, I think they will help, but not too effectively. You are scratching where it doesn’t itch. With a lower interest rate, you won’t have solved the problem, just slowed it down.”
When comments from NESDC secretary-general Danucha Pichainant calling on BOT to reduce rates went public, he insisted that he was not infringing on the central bank’s independence.
“I was not pressured by the prime minister to come out and say what I said. I just saw the numbers and thought the BOT should consider other measures.”
He refused to comment on whether the MPC should call a special session but said the rising household debts should be noticed by the BOT.
