According to the World Bank, Thailand’s current interest rate levels are deemed appropriate and neutral for the prevailing economic conditions, as stated at an event in Bangkok on Wednesday. Kiatipong Ariyapruchya, the World Bank’s Senior Economist for Thailand, informed reporters that while the Southeast Asian country is experiencing temporary disinflation, there is no indication of deflation. He noted that it is typical for the central bank to hold differing perspectives from the government.
These remarks coincide with Prime Minister Srettha Thavisin’s ongoing calls for the Bank of Thailand (BOT) to implement a 25 basis points interest rate cut, arguing that the economy is facing a ‘crisis,’ a characterization that the central bank disputes. Despite government pressure, the BOT has maintained its benchmark interest rate at 2.50%, the highest in ten years. The BOT is scheduled to review its policy stance on April 10.
BOT Governor Sethaput Suthiwartnarueput has described the disagreement with the government as a “creative tension,” asserting that rate cuts would not significantly benefit the economy due to underlying structural issues.
In contrast, Srettha, who also serves as the finance minister, has advocated for rate cuts, citing low inflation as justification. Thailand’s consumer price index for February declined for the fifth consecutive month, dropping by 0.77%. Kiatipong clarified that this decline signifies disinflation, which is considered a temporary phenomenon. The World Bank anticipates that inflation will eventually return to normal levels.
Kiatipong stated that the government’s proposed $14 billion plan to distribute 10,000 baht ($279.56) to 50 million Thais through a digital wallet for spending in their local communities could potentially increase GDP by 1 percentage point. However, he also highlighted that such a measure would lead to a 3 percentage point increase in debt.
In contrast, the World Bank suggests implementing more targeted measures to address economic challenges.