Bank of Thailand Governor Raises Alarm on Fiscal Stability
Central bank chief warns against new stimulus, urges fiscal prudence to protect national credit rating
Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput has voiced serious concerns about the nation's fiscal stability, warning that a weak financial position could lead to a downgrade of its credit rating.
Speaking at a media briefing on Tuesday, the governor stated there was no need for further economic stimulus and urged the government to save its resources for a genuine crisis.
Sethaput highlighted that Thailand's current economic situation requires a balanced approach, combining both stimulus and austerity.
"Looking ahead, I am very concerned about our financial stability," he said. "Our fiscal position isn't as strong as it once was, as we had to use considerable resources during the COVID-19 pandemic. What we want to see now is that after using our ammunition, we must tighten our belts to rebuild a stable fiscal foundation for the medium term."
He explained that a healthy economy rests on three pillars: fiscal policy, the balance of payments and currency, and debt from financial institutions.
While the country is generally performing well, he stressed that fiscal stability is a critical area that requires special attention.
Failure to do so could lead to the government using its limited budget for unnecessary stimulus, which poses a risk to the country’s credit rating.
The governor noted a worrying trend in government finances. Over the past five years, spending has grown at an average of 4%, while revenue has increased by only 1.7%. If this continues, it will be unsustainable and threaten the nation's credit rating.
"We haven't yet seen a framework for fiscal sustainability," he said. "The debt-to-GDP ratio, which has risen, has not yet fallen."
Sethaput also addressed the ongoing challenge of household debt, suggesting that solutions must focus on increasing people's incomes and restructuring debt.
He expressed concern about the long-term outlook for loans to small and medium-sized enterprises (SMEs), noting that non-performing loans (NPLs) for SMEs stand at 7%, significantly higher than the 1% for large businesses.
He emphasised that structural issues require government support mechanisms, such as credit guarantees, to facilitate the recovery of SME credit.
