April 11, 2024
The Bank of Thailand’s Monetary Policy Committee (MPC) on Thursday dismissed claims its policy interest rate of 2.5% was impeding economic revival, saying delayed government budget disbursement was the real culprit.
MPC secretary-general Piti Disyatat said late disbursement of the fiscal 2024 budget to state agencies had sucked out 140 billion baht from the economy or 0.8% of GDP.
The 2024 budget bill should have been enacted by the end of September for the start of the fiscal year in October. But last year’s general election and delays in forming a coalition government meant the bill was only enacted last month.
Delayed disbursement led to a 20% decrease in money circulating in the economy in the fourth quarter of 2023, followed by a 40% decline in the first quarter of this year, Piti said.
He said the MPC regarded late budget disbursement as a key factor holding back economic growth this year.
Another factor was the high level of inventory, he added.
Inventory refers to raw materials and finished products that businesses hold in stock.
Despite these obstacles, the MPC forecasts economic growth of 2.6% this year and 3% next year, driven by accelerated budget disbursement and recovery of the tourism industry.
Piti said Thailand had registered over 10 million foreign tourist arrivals in the first three months of 2024 and was on track to welcome 35.5 million in total this year.
On Wednesday, the MPC maintained the policy rate at 2.5% for the third successive meeting, resisting repeated government pleas for a cut. The government argues that the current level is suppressing economic growth.
Piti said on Thursday that the MPC’s aim was to maintain sustainable growth in the long term. Lowering the policy rate too soon would accelerate borrowing and exacerbate debt levels, slowing growth in the mid-term, he said.
Prime Minister Srettha Thavisin’s call for a policy rate cut was reasonable, but the MPC had taken short-term and long-term economic impacts into account before deciding to maintain the rate at 2.5%, he added.
Source: The Nation