The recent discussions between Thailand’s central bank and the finance ministry have brought to light the clash of views on certain key issues. Prime Minister Paetongtarn Shinawatra has raised concerns about central bank independence, referring to it as an “obstacle” to economic growth. This comes after her predecessor, Srettha Thavisin, was removed from office by court order. Srettha, who belonged to the same political party as Paetongtarn, had advocated for interest rate cuts by the central bank to stimulate growth. Despite the differences in opinion, Bank of Thailand Governor Sethaput Suthiwartnarueput emphasized the importance of accountability that comes with the central bank’s independence during a press conference. He also expressed the central bank’s willingness to collaborate with all stakeholders to address economic challenges.
The central bank’s decision to maintain its key interest rate for the fifth consecutive meeting reflects a cautious approach amidst uncertainty. Sethaput mentioned that the current interest rate level was deemed neutral as they awaited clarification on Thailand’s economic policies under the new leadership. He signaled a readiness to adjust policy rates based on evolving economic conditions. Prime Minister Paetongtarn’s announcement to review the government’s flagship digital wallet cash-handout program worth 500 billion baht has added to the economic policy uncertainties. The growth of Thailand’s economy by 2.3% in the April-June quarter, compared to 1.6% in the previous quarter, has provided some positive momentum. However, analysts have raised concerns about the impact of fiscal policy ambiguity on the future economic trajectory.
Looking ahead, the central bank’s projections for economic growth and inflation remain consistent with previous forecasts. In June, the bank estimated a growth rate of 2.6% for the year, following a 1.9% expansion last year that lagged behind other regional economies. The dynamic nature of economic conditions and policy decisions necessitates a proactive stance from both the central bank and the government. As Thailand navigates through a period of transition and policy adjustments, collaboration between the central bank and the finance ministry becomes critical for achieving sustainable economic growth. The willingness of the central bank to adapt its policies based on emerging trends underscores the importance of flexibility in addressing economic challenges.