World Bank office aligns with Bank of Thailand on interest rate


March 07, 2024

Thailand’s current monetary and interest policies are already suited to the current situation, and there is no need to adjust the interest rate downwards, Kiatipong Ariyapruchya, senior country economist of the World Bank in Thailand, said on Wednesday.

“There is no need to bring down the interest rate despite the US Federal Reserve signalling a downwards adjustment in its policy rate soon, which will result in capital flowing out of Thailand,” he said. “The World Bank believes that interest policy must be based on the current inflation situation, as well as other economic indicators of each country.”

The Bank of Thailand’s Monetary Policy Committee (MPC) on February 7 decided to hold the policy rate at 2.5%, which is almost at a 10-year high, amid ongoing negative inflation for four consecutive months.

The decision was met with criticism from several parties, including Prime Minister and Finance Minister Srettha Thavisin, who on February 20 urged the MPC to schedule an urgent session to consider the interest rate before the next meeting in April.

Kiatipong, a specialist in macroeconomics & fiscal management, added that the current challenge faced by the Thai economy is the boosting of gross domestic product (GDP) in the short, medium and long terms to 3%, 4% and 5% respectively in a bid to set the kingdom on the path to becoming a high-income country.

“Thailand should focus its investment on human resource development and basic infrastructure. This must be done in parallel with eliminating factors that could obstruct ease of doing business” he said.

Kiatipong also commented that the government’s 500-billion-baht digital wallet scheme could help boost the GDP in the short term by approximately 1%, but will create a huge burden on the country’s finances in the future, as the budget for the scheme is almost 3% of the GDP.

He concluded that the scheme may not be necessary after all, as Thailand’s private consumption, one of the main economic drivers, is still growing despite some slowdowns.

“What is truly worrying is the rise of household debts, which are now among the highest in ASEAN. This could significantly undermine the growth in Thai consumption,” he said.

Kiatipong added that other economic pitfalls that Thai authorities need to look out for include stagnating exports and delays in fiscal budget disbursement.

Source: The Nation