6-3-2024 (BANGKOK) The World Bank stated on Wednesday at an event in Bangkok that Thailand’s current interest rate levels are appropriate for the prevailing situation and are considered neutral. Kiatipong Ariyapruchya, the World Bank Senior Economist for Thailand, addressed reporters, noting that while the Southeast Asian country is experiencing temporary disinflation, there is no indication of deflation. He highlighted the normalcy of having differing views between the central bank and the government.
This statement comes amid persistent calls from Prime Minister Srettha Thavisin for the Bank of Thailand (BOT) to reduce interest rates by 25 basis points, arguing that the economy is in a ‘crisis.’ The BOT, however, has resisted such pressure, maintaining rates at 2.50 per cent, the highest in a decade. The next policy review is scheduled for April 10.
BOT Governor Sethaput Suthiwartnarueput characterized the disagreement with the government as “creative tension,” emphasizing that rate cuts would not substantially benefit the economy due to inherent structural issues. Srettha, who also serves as finance minister, contends that rate cuts are appropriate given low inflation levels.
The February consumer price index in Thailand dropped for the fifth consecutive month, experiencing a 0.77 per cent decline. Kiatipong clarified that this is disinflation, a temporary effect, and the World Bank anticipates a return to normal inflation levels.
Discussing the government’s $14 billion plan to distribute 10,000 baht ($279.56) via a digital wallet to 50 million Thais for spending in their local communities, Kiatipong acknowledged its potential to boost GDP by 1 percentage point. However, he cautioned that it would also increase debt by 3 percentage points. The World Bank advocates for more targeted measures in addressing economic challenges.
