Thai PM says rate cut would have been right for economy, public ‘suffering’

By Thomson Reuters Apr 11, 2024 | 12:02 AM

By Chayut Setboonsarng and Panarat Thepgumpanat

BANGKOK (Reuters) – Thailand’s economy would have benefited from a cut in key interest rates, Prime Minister Srettha Thavisin said on Thursday in a response to the Bank of Thailand’s (BOT) decision to hold interest rates steady.

Srettha has been at loggerheads with the central bank for months, urging it to cut rates that are a decade high of 2.50% to try to drive an economy he insists is in crisis, and lagging regional peers.

“The independence of the central bank should not be independent of the suffering of the people,” Srettha told reporters, adding he did not want to pressure the central bank.

The central bank’s monetary policy committee on Wednesday voted 5-2 to hold rates at 2.50%, as it did in the last meeting on Feb. 7, resisting months of government pressure to cut rates.

The next rate review is on June 12.

“Most academics agree that it is time to cut rates, it would help exports, tourism and help the economy … everybody would benefit,” Srettha added.

Political newcomer Srettha, who is also the finance minister, has disagreed openly with the BOT since last year over the direction of monetary policy, repeatedly saying rate cuts will help as the economy confront high household debt and China’s slowdown.

Southeast Asia’s second-largest economy unexpectedly shrank 0.6% in the final quarter of 2023 from the third, prompting the state planning agency to cut its 2024 growth outlook to between 2.2% and 3.2% from the 2.7% to 3.7% earlier projected.

Growth was 1.9% in 2023, slower than expected and less than the 2.5% growth in 2022.

The central bank said the current interest rate was appropriate for Thailand’s economic outlook and did not hinder growth.

On Wednesday, the central bank revised down 2024 GDP forecast to 2.6% from 2.5% to 3.0% However, the government projects 4% growth this year.

(Reporting by Chayut Setboonsarng and Panarat Thepgumpanant; Editing by Martin Petty)