29-1-2024 (BANGKOK) The Thai economy is currently facing a state of recession due to the significant levels of household debt, according to Deputy Finance Minister Julapun Amornvivat. This situation puts pressure on the country’s central bank to consider reducing interest rates as a potential solution. To alleviate the economic burden on the people, Amornvivat suggested that the policy interest rate, currently at a decade-high of 2.50 percent, should be lowered at the central bank’s next policy review on February 7.
Amid the crisis, the government remains committed to implementing its ambitious 500 billion baht ($14 billion) handout plan, which aims to distribute 10,000 baht ($281) to 50 million Thai citizens. Although there might be a delay in the rollout, the government hopes it will not be prolonged.
Prime Minister Srettha Thavisin has also expressed the urgent need for the central bank to cut the key interest rate to help revive Southeast Asia’s second-largest economy. The Bank of Thailand Governor, Sethaput Suthiwartnarueput, who has faced criticism from the premier for not taking such action despite negative inflation, recently stated that while growth has been slower than expected, the economy is not in a state of crisis. Sethaput described the current policy rate as “broadly neutral.”
The central bank has maintained its policy rate at 2.50 percent since its last rate meeting in November. In previous months, the bank raised the rate by 200 basis points starting from August 2022, aiming to curb inflation.
Given the challenges faced by the Thai economy, the government has revised its growth projections for 2023 and 2024. The latest forecast for 2024 estimates a growth rate of 2.8 percent, down from the previous projection of 3.2 percent. The revision is attributed to weaker exports and a decline in foreign tourist numbers. The 2023 growth estimate was also lowered to 1.8 percent from the earlier projection of 2.7 percent, falling below the 2.6 percent growth recorded in 2022. Official figures for 2023 gross domestic product (GDP) are scheduled to be released by the planning agency on February 19.
Deputy Finance Minister Julapun Amornvivat emphasized that the current economic situation is precarious, with the country teetering on the edge of a recession. The high levels of household and private sector debt have made it challenging to stimulate economic growth, resulting in persistently sluggish performance.
To address the economic challenges, Thailand is considering issuing bonds overseas in the next one or two years, denominated in dollars, yuan, and yen. This move aims to establish benchmarks for businesses to raise funds. Additionally, the government plans to issue government savings bonds worth approximately 100 billion baht ($2.8 billion) in the 2024 fiscal year, with the first batch of 40 billion baht set for release in March.
