By Orathai Sriring and Chayut Setboonsarng
Bank of Thailand Governor Sethaput Suthiwartnarueput emphasized the importance of the economic outlook in making decisions about interest rates during a recent business forum. The policy interest rate of 2.5% is one of the lowest globally, with structural factors hindering Thailand's economic growth.
The BOT projects a growth rate of 2.6% for 2021 and 3% for 2025, highlighting the uneven recovery. Sethaput expressed dissatisfaction with the current growth rate, emphasizing the need for higher growth to improve living standards and welfare.
Despite government pressure for a rate cut, the central bank maintained interest rates for the fifth consecutive meeting. Sethaput stated that the BOT is prepared to adjust rates if the economic outlook changes, emphasizing the importance of policy flexibility to withstand uncertainties.
The central bank observed varying sectoral growth, with tourism performing better than manufacturing. Structural issues, such as demographic changes, were identified as contributing to this disparity. Additionally, concerns about deteriorating credit quality, particularly in the small and medium-sized enterprise segment, were highlighted.
Sethaput emphasized the need to monitor credit conditions closely and acknowledged the challenge of reducing the household debt-to-GDP ratio from above 90% to a target level of 80%. Overall, the central bank remains vigilant and prepared to act in response to changing economic conditions.
Analysis:
The Bank of Thailand's stance on interest rates reflects its commitment to maintaining economic stability while addressing challenges such as uneven growth and deteriorating credit quality. The central bank's willingness to adjust rates based on the economic outlook indicates a proactive approach to managing uncertainties. As an investor or individual, it is essential to monitor these developments as they can impact financial markets and overall economic conditions. Understanding the central bank's policy decisions and economic assessments can help individuals make informed decisions about their investments and financial planning.