Thai Finance Minister Advocates Interest Rate Cut to Stimulate Economic Growth
Thailand’s finance minister, Pichai Chunhavajira, has indicated that the country’s low inflation provides an opportunity to reduce interest rates, aiming to stimulate economic growth and help weaken the baht to boost exports. The Bank of Thailand is set to review its key interest rate this week, and while most economists expect the rate to remain unchanged at 2.25%, Pichai believes that a rate cut could invigorate the economy. The country’s inflation rate, at 1.32% in January, remains well below the central bank’s target, which has given the government the confidence to explore lower rates.
The minister emphasized that lower rates could support producers by addressing the issue of persistently low prices in the economy. With inflation staying low, Pichai noted that this could hurt businesses as they face decreased revenues. He also highlighted the importance of maintaining economic momentum throughout the year, which a rate reduction could help achieve. The government’s strategy is to keep pushing for economic growth while managing inflation effectively.
In addition to advocating for a rate cut, Pichai pointed out the persistent issue of high household debt in Thailand. He called for measures that would help reduce this burden, encouraging banks to be more flexible in their lending practices. Moreover, he suggested that the central bank should relax certain loan-to-value rules, particularly in the property sector, to foster a more favorable economic environment.
A weaker baht is also crucial for Thailand’s export-driven economy. Pichai stressed that a depreciating currency is often beneficial for exporting countries, as it makes their goods more competitive internationally. The baht has strengthened by 2.5% against the U.S. dollar since the start of the year, which could impact exports negatively. As the country prepares for the central bank’s decision on rates, discussions on inflation, household debt, and the currency have been ongoing between the finance ministry and the central bank.
SOURCE: REUTERS