Thai prime minister clashes with central bank governor over policy

PM calls for lower rates amid negative inflation while governor criticises government’s handout plans

Sethaput Suthiwartnarueput
Bank of Thailand governor Sethaput Suthiwartnarueput

Thailand’s prime minister Srettha Thavisin said he will meet the central bank governor on Wednesday, a day after calling for lower rates.  

Srettha said today (January 9) he will discuss topics including the government’s planned “digital wallet” handout with governor Sethaput Suthiwartnarueput, media reported. On January 8, Srettha, who is also finance minister, said the central bank could consider cutting interest rates, saying inflation was at a “very low” level. 

Inflation was negative for the third consecutive month in December, reaching -0.83% year on year, down from 0.44% in October and -0.31% in September. The Bank of Thailand (BoT) has set a 1–3% inflation target for 2024.

The central bank’s tightening has hurt the economy and affected low-income people and small and medium-sized enterprises, Srettha said in a post on social media on January 7. 

The prime minister urged the central bank to keep the interests of the people in mind and not raise rates. He has also clashed with Sethaput over the government’s “digital wallet” plan to hand out money to 50 million people in May. 

It plans to give 10,000 baht ($283) to all Thais aged 16 and above, allowing them to spend it in their localities for six months. The government estimates the scheme will cost 500 billion baht, after it reduced its original plan by around 60 billion baht.

In November, Sethaput raised concerns about the source of funds for the scheme, and questioned whether it would contravene existing laws, according to The Nation. On January 8, deputy finance minister Julapun Amornvivat said Thailand’s council of state had found no law prevented the government financing the plan with debt. 

On January 9, Srettha said the government will push ahead with the digital cash handout, adding that he would seek to enlist Sethaput’s support for the plan. Pheu Thai, Sretta’s party, promised to roll out the digital wallet scheme during its campaign in the May 2023 general election. 

Critics, including former finance minister Korn Chatikavanij, have said the scheme could fuel inflation and damage fiscal discipline. Central bank economists have privately criticised the stimulus plan, comparing it to “poisoned honey”, according to The Nation in October. 

BoT paused hikes

The BoT kept its policy rate unchanged at 2.5% in November, after raising it in eight consecutive meetings by a total of 200 basis points since August 2022. The central bank’s next policy meeting is set for February 7.

Thailand’s GDP grew just 1.5% year on-year in the third quarter, the slowest pace in three quarters. The central bank said this was driven by weak exports and government spending. 

In November, the BoT cut its GDP forecasts for 2023 and 2024. It predicted GDP will grow in 2023 to 2.4%, down from its previous projection of 2.8%, and by 3.2% in 2024, down from 4.4%. 

At the November 29 meeting, the BoT said its current policy rate was appropriate for supporting long-term sustainable growth, saying tourism and exports were improving. It also pointed to inflation risks from due to the El Niño effect and a possible rise in global energy prices. 

The central bank estimated that inflation would be 2.2% in 2024, taking into account the government’s “digital wallet” plans.  

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