Thailand’s economy may underperform with consumption weak, warns central bank chief
THAILAND’S economic growth may falter at under 2.9 per cent this year after a weaker-than-expected fourth quarter despite a vaunted government cash handout aimed at firing up sluggish growth, the central bank chief said on Thursday.
The Bank of Thailand previously anticipated that the economy could expand by 2.9 per cent this year, lower than the finance ministry’s projection of 3 per cent growth.
“I have to say that there is some downside risk to that figure,” Governor Sethaput Suthiwartnarueput told Reuters in an interview.
The economy may have expanded close to 2.7 per cent in 2024, with the final-quarter pace weaker than forecast, at north of 3 per cent, driven in significant part by weaker-than-expected consumption, he said.
“The impact of the handouts and the stimulus was less than we had expected,” he said. “The handouts that went out sometimes were used to pay down debt and whatnot, so you didn’t see that translation into consumption.”
Sethaput’s remarks were his first this year on the economic growth outlook and the effectiveness of the government’s signature US$14 billion handout policy.
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Thailand’s government is set to roll out the third phase of its “digital wallet” programme in April, aiming to spur “very high” growth in the first quarter. The scheme, the ruling party’s core election campaign policy, was launched last September after repeated delays.
Policy rate appropriate
The BOT’s monetary policy stance remains broadly neutral and it expects inflation to rise to 1.1 per cent this year, within the target band of 1 per cent to 3 per cent, Sethaput said. However, the central bank remains concerned about baht volatility, though it has no currency levels in mind, he added.
“We feel...when you take it all together, the current policy rate is appropriate for striking the right balance for those things,” he said.
“That said, if things change, we’re prepared to change.” Last month, the central bank left its main interest rate at 2.25 per cent after a surprise cut in October. It will next review policy on Feb 26. Sethaput said the current inflation target band has served well, even though the government wants prices to rise to the 2 per cent midpoint.
“Trying to focus too much on a specific numerical target, I would argue, has adverse unintended consequences,” he said.
The central bank wants to have the overall inflation regime anchored at a low level, even if it’s not 2 per cent, Sethaput said. There are no signs of deflation in Thailand, he added, despite prices growing just 0.4 per cent last year.
Sethaput said the buffer provided by Thailand’s high international reserves, of around US$237 billion as of mid-January, had been a source of “strength and stability” at a time of high uncertainty.
Trump uncertainty
The return of Donald Trump as US president had injected more uncertainty but it was still too early to gauge any impact on Thailand, the governor, who finishes his five-year term in September, said. South-east Asia’s second-largest economy seeks to benefit from a reworking of supply chains triggered by threatened US tariffs.
Sethaput underlined the central bank’s hesitation on cryptocurrency, even as the Thai government touts it as an alternative payment system, with a proposal for a digital asset ‘sandbox’ on the tourist island of Phuket.
Cryptocurrencies lack a stable value, their underlying technologies are not very scalable and can lead to a fragmented payment system, he said, pointing out that Thailand’s existing Promptpay digital payment platform was working well.
“I understand, again, where the impetus is coming from. Even in the US we see, you know, a push for this,” he said. “The benefits of the use case have to be very, very clear because there are downside risk to moving to that.” REUTERS
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