New Thai central bank chief’s arrival fuels bets of larger cut
The leadership transition at the bank also comes as the country sees its third government change in just over two years
[BANGKOK] When Vitai Ratanakorn takes over on Wednesday (Oct 1) as the new governor of the Bank of Thailand (BOT), the seasoned banker is expected to take a dovish policy stance due to mounting risks to the country’s export-led growth from US tariffs and a strengthening currency.
Economic activity is forecast to slow following a stronger-than-expected performance in the first half of this year, while Prime Minister Anutin Charnvirakul’s minority government faces fresh elections by April. The risk of renewed instability have prompted Fitch Ratings and Moody’s to downgrade Thailand’s outlook to negative from stable.
Previous calls for looser policy and better rate transmission by Vitai, 54, have prompted Standard Chartered to predict that the first rate decision under his leadership, scheduled Oct 8, will result in a cut as deep as 50 basis points. Citigroup analysts last week flagged the risk of a bigger cut than their 25 basis-point forecast.
Asked to comment on market expectations, Vitai said on Tuesday that “I would not say I am very dovish. I prefer accommodative monetary policy to support sustainable growth”.
Vitai’s predecessor, Sethaput Suthiwartnarueput, has already slashed borrowing costs by a cumulative 100 basis points in an easing cycle that began a year ago.
“Our sense is that the new governor will likely be more dovish than his predecessor based on his previous comments, which seem to suggest a strong priority in reviving growth as well as improving policy transmission,” Nomura Holdings economist Euben Paracuelles said.
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Vitai did not immediately respond to the request for comments.
The leadership transition at the bank also comes as Thailand sees its third government change in just over two years. Anutin is seeking to win voter support ahead of the polls by spending billions of baht on cash discounts for food and other essentials, as well as subsidies to cut electricity and travel costs.
However, budget disbursements are expected to slow during the election period and the months before a new government is formed. The BOT has forecast growth will ease to 1.7 per cent in 2026 from about 2 per cent this year. Outgoing governor Sethaput has cautioned that “the worry is next year”.
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A fresh bout of political uncertainty following next year’s elections could further weigh on an already fragile economy, which has trailed regional peers such as Indonesia and the Philippines over the past decade.
Meanwhile, a rally in the baht to a four-year high last month is hurting Thailand’s exports and tourism sectors that together account for 70 per cent of the nation’s gross domestic product.
With the currency’s strength at odds with weak economic fundamentals, Vitai faces pressure to act swiftly to support exporters already hit by a 19 per cent US tariff.
Another issue likely to draw Vitai’s focus is South-east Asia’s highest household debt burden. Although the central bank and government have worked with lenders to provide relief, average debt is projected to reach a record 740,597 baht (S$29,436) this year, according to a survey.
The new governor will also need to craft policies that expand access to capital for millions of debt-ridden small and medium-sized enterprises, a key priority of Anutin’s administration. BLOOMBERG
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