Very low inflation points to economic problems, ex-finance minister warns
Declining headline inflation for four consecutive months — at 1.11% in January 2024 — and core inflation at 0.52% are too low and point to a problematic economy, former finance minister Suchart Thada-Thamrongvech said on Wednesday.
Suchart, an economics professor at Ramkhamhaeng University, said that in the current climate, economic growth was limited while people were suffering from low earnings and increasing debt.
January numbers are well below the inflation target the Bank of Thailand (BOT) had earlier proposed to the Cabinet, at 1-3%, he said, adding that “someone should take responsibility for this”.
“The government’s subsidies on fuel and electricity bill for people are minuscule compared to the size of the GDP,” he pointed out. “This translates into very little impact on pushing the inflation, while the interest rate keeps on increasing. As a result, GDP growth is limited, while people are earning less and becoming poorer, he said.
Suchart said factors to accelerate GDP growth include private investment, public consumption, export and tourism, all of which would be negatively affected by too high interest rates and a stronger baht.
“The BOT needs to lower the policy rate to inject more money into the economy, as well as weaken the baht to boost exports and attract foreign investments,” he said.
Suchart added that in 2023 Indonesia’s and Vietnam’s inflation was at 2.9% and 3.4% respectively, resulting in their GDP growing more than 5%. “Thailand should set a suitable inflation target at 3-4% to ensure continued economic growth,” he said.
On Tuesday, Prime Minister Srettha Thavisin said the central bank should consider reducing the policy rate by at least 25 basis points when its Monetary Policy Committee meets on Wednesday.
The current policy rate is at 2.5%.
