Central bank to blame for Thailand’s slow growth, says PM advisor

MONDAY, MAY 27, 2024

Thai economy still slumping compared to other ASEAN countries because the BOT is doing nothing to help, PM's advisor says

An advisor to the prime minister, Pichai Naripthaphan, took the central bank to task again for doing very little to address the country’s poor economic performance.

In a comment on Monday, the advisor compared Thailand’s economic data in the first quarter to that of other ASEAN nations. He said Thailand’s figures show that the country is still wallowing in an economic slump and that the Bank of Thailand (BOT) has been indifferent to the situation.

The latest criticism came after Prime Minister Srettha Thavisin and the central bank had locked horns several times over whether the policy interest rate should be lowered from 2.5%.

Srettha, who also held the Finance portfolio at that time, had called on BOT to reduce the policy rate by at least 25 percentage points, but the bank had insisted that the current rate was fine for maintaining economic stability.

Pichai said that though the GDP expanded by 1.5% in the first quarter instead of the projected 1%, it was still “very bad”. In comparison, he said, other ASEAN nations had done far better in the first quarter.

For instance, he said, the Philippines had grown by 5.7%, Indonesia by 5.1%, Malaysia by 4.2% and Singapore 2.7%.
“This proves that the ASEAN economy is still good, but Thailand’s economy is very bad,” Pichai said.

He said he had warned earlier that the economy would remain poor in the first quarter because the government had only taken office in August last year and could not implement fiscal measures in time. Also, he said, the 2024 budget bill had just been implemented in April.

Pichai said the BOT had turned a deaf ear to the government’s repeated calls for it to enact monetary measures to support the economy in the first quarter.

He added that another urgent issue the BOT needs to help the government with is the high household debt, which has risen to 16.3 trillion baht or about 91% of the GDP.

Comparing BOT to the US Federal Reserve, he said that whenever the United States suffered an economic slump, the Fed would step in to issue quantitative easing measures to stimulate the economy. The Fed’s measures boost the money supply and encourage lending.

“Yet the BOT does nothing,” the advisor complained.

Pichai also noted that the currencies of other ASEAN nations had dropped a lot after the 2000 Tom Yum Kung crisis, but the Thai currency strengthened, which could be another reason for poor growth in the first quarter.

For instance, he said, the Philippine peso fell from 39.95 pesos per US dollar to 58 pesos now and Vietnamese dong from 14,000 dongs per US dollar to 25,400 dongs now. The baht in comparison had dropped to 54.66 to the greenback in 2000 but has now strengthened to 36.46. 

Pichai said the spread of saving and lending interest rates of commercial banks in Thailand was far higher than in other ASEAN nations, and this was also blamed for poor growth in the first quarter. Yet, he said, the BOT has done nothing.

He added that the spread of rates in Thailand came in at about 6-7%, compared to 2-3% in other ASEAN nations.

“The civil and business sectors are having to shoulder higher costs due to higher rates, and this issue has been raised with the central bank several times,” Pichai said.

“This problem is not related to the policy interest rate, and the central bank can act immediately. Yet, it has done nothing.”

He added that this inaction by the BOT prompted the premier to negotiate directly with commercial banks, even though the central bank must oversee the operations of commercial banks.

“I have no prejudice against the BOT, but would simply like it to do what it should have done to support the economic expansion, which has been sluggish for 10 years,” Pichai said.

“The BOT’s monetary measures are far more important to the economy than the government’s fiscal measures. Everywhere else, governments depend on their central banks’ cooperation to revive the economy,” he said.

The advisor added that if the central bank refuses to change its attitude and way of working, Thailand would find it difficult to grow.