Thai Finance Deputy Says Key Rate ‘Too High,’ Restraining Growth

Suttinee Yuvejwattana and Claire Jiao
·3-min read

(Bloomberg) -- Thailand’s benchmark interest rate is “too high,” hurting the standard of living of people and weighing down the economy, according to Deputy Finance Minister Julapun Amornvivat who urged the central bank to consider easing monetary policy.

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“It is too high considering the spending power that the Thai people have at the moment,” Julapun said in an interview with Bloomberg Television’s David Ingles on Wednesday in Hong Kong. “I hope that they can realize the burden that’s been put on Thai people and reduce the rate. I hope that they will do it soon.”

Julapun, who’s considered as one of the key advisers to Prime Minister Srettha Thavisin, is amplifying rate cut calls that the premier had made earlier this month. The Bank of Thailand pushed back against the appeal saying the rate was appropriate. The policy disagreement that began shortly after Srettha took on the job in August risks deepening a slump in the baht and the stock market.

While the government recognizes the independence of the BOT, it is concerned about borrowing costs hovering at a 10-year high holding back economic recovery, Julapun said. In the end, it’s the central bank that will decide the level of interest rates and the government will do all it can to stimulate the economy, he said. The next rate meeting is on Feb. 7.

Gross domestic product growth in Southeast Asia’s second-largest economy has averaged below 2% in the past decade, trailing its neighbors. Last year, GDP growth was estimated to have slowed to 1.8% even as a recovery in tourism, a key pillar of the Thai economy, began gathering pace. At the same time, consumer prices have fallen in the fourth quarter, bolstering Srettha’s rate cut calls.

Julapun, who’s attending the Asian Financial Forum in Hong Kong, said he’s also concerned about the baht’s volatility, with the currency having “moved too fast and unpredictably.” It’s the central bank’s job to stabilize it, he said.

A 500 billion baht ($14 billion) cash handout plan will be delayed from an earlier target roll-out date of May to sometime within the year, Julapun said. It’s been held up by some issues that have to be clarified including how it will be financed but he assured it will be on track.

The plan is to issue local-currency bonds of different tenors once a law is in place to fund the handout, Julapun said.

“Right now the economy is in bad shape,” he said. “So the government believes it is imperative that we need to inject money into the system so that people can have a better lives.”

The baht has gone from the best-performing Asian currency in the fourth quarter to among the biggest losers this year, while the benchmark stock index dropped to a three-year low this week. Foreign investors have sold a net $719 million this year, adding to $5.1 billion in outflows in 2023, according to data compiled by Bloomberg.

By rolling out stimulus measures including, reviving tourism, boosting infrastructure and foreign investment, Srettha is targeting to lift annual GDP growth to 5% within his four-year term. Julapun said it will be difficult to do that this year.

Tourism remains a bright spot for Thailand, with authorities targeting foreign tourist arrivals to jump to as high as 35 million from 28 million last year, Julapun said. Of that, about 8 million are expected to come from mainland China this year, up from 3.5 million in 2023.

“We are trying our best to bring Thailand back to its feet, to get to the number that we hope for, the GDP growth of 5%,” Julapun said.

--With assistance from Anuchit Nguyen and Biyun Song.

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