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Experts Call for Stability at the Bank of Thailand

Experts Call for Stability at the Bank of Thailand

Economists and prominent business leaders are urging the new chairman of the Bank of Thailand (BoT) to prioritize financial system stability and navigate the nation’s economic challenges effectively.

This call comes amid a conflict involving central bank governor Sethaput Suthiwartnarueput and politicians, including Prime Minister Paetongtarn Shinawatra, regarding interest rate cuts aimed at stimulating the economy. The government has nominated Kittiratt Na-Ranong, a former finance minister and economic advisor to former Prime Minister Srettha Thavisin, as a candidate for the BoT board chair. Mr. Kittiratt is known for his criticism of the central bank’s strict monetary policies and his loyalty to the ruling Pheu Thai Party.

On Tuesday, the selection committee did not finalize the appointment of a new board chairman, and a date for the next meeting to discuss candidates remains unannounced.

The business community emphasizes the need for enhanced cooperation between the central bank and the government to address economic issues, including managing fluctuations in the baht’s value. Poj Aramwattananont, vice-chairman of the Thai Chamber of Commerce and Thai Board of Trade, stated, “Effective monetary and fiscal policy management should be implemented while maintaining financial and fiscal discipline.”

According to Poj, it is crucial to stabilize the baht’s value, as its appreciation could adversely affect the tourism and export sectors. A continuing upward trend might diminish the country’s competitiveness in pricing and reduce export revenues in baht terms, with such trends possibly persisting until the first quarter of 2025. He added that the Chamber desires the central bank to align its policy interest rate with global markets, as the US and China have recently cut their rates to alleviate business costs.

Kiatanantha Lounkaew, a lecturer at Thammasat University’s Faculty of Economics, insisted that the central bank should work towards aligning Thai interest rates with those abroad, particularly as many global central banks are aggressively cutting rates, widening the gap with Thai rates. He noted that reducing interest rates might have limited impact on reviving the economy due to high household debt levels and issues with unsold condominium units.

“The role of the central bank should be to maintain stable monetary policies to support the effectiveness of fiscal measures from the Finance Ministry and government,” Kiatanantha explained. He also stressed the importance of the central bank preparing for external challenges, including rising tensions in the Middle East and the upcoming US presidential election.

Regarding political influence over the central bank, Kiatanantha stated that merely appointing a new board chairman wouldn’t be sufficient to sway other board members to adopt pro-government policies. “If the new chairman symbolizes a stronger alignment of monetary and fiscal policies, that would positively affect sentiment. However, I believe the central bank remains committed to good governance, which would make political intervention challenging,” he added.

Jitipol Puksamatanan, an economist at Finansia Syrus Securities, highlighted stagnant wages as a critical issue impacting the Thai economy, with soaring costs leading to cautious consumer spending. He suggested that a one-time interest rate cut would relieve pressure on the central bank but also stressed the need for new financial measures to stimulate the economy.

“The central bank chairman should be knowledgeable and capable of coordinating with relevant agencies to ensure smooth operations,” Jitipol said, calling for a diverse board that prioritizes national interests.

Montri Mahaplerkpong, chairman of the International Chamber of Commerce (ICC), emphasized the necessity for the new board chairman to uphold the central bank’s autonomy in monetary policy. “We trust that the central bank will take the most appropriate actions, especially following interest rate cuts by the US Federal Reserve,” he noted.

The ICC urged authorities to give more attention to the net interest rate spread of commercial banks, which significantly impacts banks’ profitability, particularly for small and medium-sized enterprises (SMEs) that could face financial strain due to high lending rates compared to deposit rates.

Sangchai Theerakulwanich, president of the Federation of Thai SMEs, insisted that the new board chairman should focus on easing financial burdens on SMEs by considering cuts to the policy rate, aligning with the Federal Reserve’s approach. Lower interest rates could help businesses thrive in a sluggish economy, as many SMEs are already struggling with high financial costs and a lack of liquidity.

Thaniwan Kulmongkol, president of the Thai Restaurant Association, pointed out that the restaurant sector, already battered by the pandemic, continues to struggle with the sluggish recovery. She called on the central bank to collaborate with commercial banks to relax loan criteria, making it easier for restaurant operators to access financing. “It is currently quite challenging for restaurant operators to obtain loans,” she lamented.

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