The central bank’s policy rate should be capped at 2%, in line with the inflation target and Thailand’s GDP growth, according to the head of the government’s planning unit.
Speaking at a seminar on the 2025 economic outlook organized by Kiatnakin Phatra Financial Group on Tuesday, Supavud Saichuea, chairman of the National Economic and Social Development Council, indicated that since the Bank of Thailand aims for an inflation target range of 1-3%, its policy rate should not exceed 2%. He also mentioned that the real policy rate ought to remain between 0-1%, consistent with the country’s GDP growth rate of under 3%.
From 2007 to 2014, the average inflation and real policy rate were both around 2%, while GDP growth averaged 3.5%.
With inflation projected at 0.4% in 2024, the central bank anticipates it could reach the lower end of the 1% target by year-end. Consequently, the average inflation level is expected to stabilize at 2%.
Given these conditions, Mr. Supavud suggested that the central bank could consider lowering its policy rate from its current position.
“The central bank’s strong monetary policy stance is designed to maintain flexibility in light of increasing uncertainties. However, if the Bank of Thailand hesitates to adjust rates until clearer economic signals emerge, it may damage the economy and not serve the interests of borrowers,” he remarked.
He cautioned that if the central bank maintains its policy rate throughout the year, it could weaken the Thai economy in the latter half due to rising global uncertainties, particularly related to new policies from US president-elect Donald Trump.
“Considering both domestic and international factors, achieving the government’s economic growth target of 3% this year will be challenging,” he added.
Mr. Supavud highlighted that Trump 2.0 policies, especially tariffs, are likely to exacerbate US-China trade tensions this year, leading to increased global uncertainties.
Thailand may be affected by these tensions, particularly in terms of exports during the second half of 2025. Therefore, both the country and local businesses need to adapt their strategies to navigate these challenges.
He noted that Thailand could benefit from trading and exporting to China in certain sectors amid the tension, particularly in food and service industries, as China continues to depend on a wide range of imports due to its status as a global manufacturing powerhouse.
Mr. Supavud mentioned that Thailand’s food exports to China outpace those of its regional competitors.
He also emphasized that the services sector, including tourism, continues to play a significant role in Thailand’s GDP.
Additionally, the government’s investment in casino-based entertainment complexes could provide support for tourism, investment, and employment in the long term. However, he cautioned that the government should remain aware of social issues related to this development.