Thailand’s deputy finance minister says policies need to be adjusted to boost economic growth

BANGKOK: Thailand’s current potential growth rate of 3 percent is not satisfactory and persistent below-target inflation is dangerous for the economy, a deputy finance minister said on Monday, calling on the government and the central bank to better align policies.

Southeast Asia’s second-largest economy grew just 1.9% last year, lagging regional peers as it struggled with weak exports, high household debt and borrowing costs. The government has said growth will come in at 3% this year.

Paopoom Rojanasakul commented on this on a local YouTube channel, where he stated that the government is trying to attract new investments and industries to increase the potential growth rate.

If nothing more is done, the potential growth rate will be around 3 percent and the economy will grow in the lower 2 percent range, he said.

“The government is not happy with this,” he said, adding that fiscal policy was fully contributing to stimulating economic growth.

In a separate statement, Paopoom told reporters the government will meet on July 15 to discuss a flagship 500 billion baht ($13.7 billion) household assistance program to be implemented in the fourth quarter.

On his YouTube channel, Paopoom blamed fiscal and monetary policy for not working together effectively enough to help economic growth reach its full potential.

“I would like us to cooperate and have a similar way of thinking about managing the economy,” he said, referring to the government and the central bank.

The government has been unable to reach an agreement with the Bank of Thailand (BOT) on interest rates for months, with Prime Minister Srettha Thavisin calling for a rate cut to stimulate the economy.

Despite pressure to ease policy, the BOT kept its key interest rate steady at 2.50 percent last month, the highest level in more than a decade. The next interest rate review is on Aug. 21.

Last week, BOT Governor Sethaput Suthiwartnarueput said there was no need to cut interest rates at present and that structural reforms, not stimulus measures, were needed to boost economic growth.

Paopoom said inflation remaining below the BOT’s target range of 1 to 3 percent for a prolonged period was a concern for the economy.

The government wants to change the inflation target range that has been in effect since 2020, saying such a change should increase the chance of cutting interest rates.

Sethaput said last week that changing the target range would put credibility, inflation expectations and borrowing costs at risk.

(1 dollar = 36.46 baht)