Outgoing Bank of Thailand boss, Veerathai Santiprabhob, says economic recovery may mean having to live with up to 30 infections per day as the government chooses his successor to augment what is expected to be a new economic team set to be in place in October after a September cabinet reshuffle. The economic challenge of this crisis is expected to crystallise then. 

It may take two years for Thailand to recover from the economic damage caused by the Covid 19 virus. But there are signs of hope. This week, outgoing Bank of Thailand Governor, Veerathai Santiprabhob, predicted that the country may have to live with the infection as it battles its way through. A recruitment process to select his successor is currently underway. This will leave Thailand with a new economic team because of the upcoming cabinet reshuffle and a new central bank chief to confront the economic pickle created by an extended shutdown of economic sectors. Some commentators are expecting that the new man in the hot seat may well be a friend and colleague of Mr Veerathai who currently works as an advisor to the prime minister.

Outgoing Bank of Thailand Governor, Veerathai Santiprabhob (left), predicts that with a vaccine, the Thai economy can recover in 2 years. He still warns that some level of infection from the Covid 19 virus might have to be tolerated. It comes as a later entrant into the race to replace him, Setthaput Suthiwart-Narueput (right), an advisor to the prime minister, is being tipped to be on a two-man shortlist.

Amid signs that the domestic economy in Thailand is getting back to work, the government will soon be focused on choosing a successor to current Bank of Thailand Governor, Veerathai Santiprabhob, who is stepping down when his term expires at the end of September this year.

The deadline for applicants was extended from June 25th to last Friday, July 10th.

The selection process involves the Minister of Finance. On Wednesday, Uttama Savanayana quit the role in a sudden move. 

His replacement will select one candidate from a list of two which will be submitted to him by a recruitment committee currently reviewing the applicants.

The cabinet will then ratify the final appointment.

Six applicants for the top job include two senior officials currently working for the Bank of Thailand

The six applicants include two executives who are currently working within the Bank of Thailand in senior roles. These are Mathee Supapongse and Ronadol Numnonda. 

However, a late applicant, last Friday, is 55 year old Mr Setthaput Suthiwart-Narueput, a member of the Monetary Policy Committee of the bank who has worked in the past for the World Bank, the IMF and Siam Commercial Bank.

He is also, significantly, a current advisor to Thailand’s Prime Minister Prayut Chan ocha.

The three other candidates who have applied for the role are Anusorn Tamajai, formerly Dean of the Economics faculty at Rangsit University and an ex-member of the Bank of Thailand’s influential monetary policy committee. 

The other two are former top executives with Ayudhya JF Asset Management. These are Tongjai Thanachanan and Suchart Techaposai.

New applicant Mr Setthaput put his name in the ring at the very last moment before Friday’s deadline

Up until the entry of Mr Setthaput as the deadline approached last Friday, the betting was on the two sitting Bank of Thailand executives being listed by the recruitment committee and forwarded to the Finance Minister. 

Now, the thinking is that Mr Setthaput will be on the list.

This is the prediction of Pipat Luengnaruemitchai of Phatra Securities in Bangkok who describes Mr Setthaput as having the agility that just might be required as Thailand’s Covid 19 crisis threatens to become an economic one and certainly one that will require a balanced and effective response from the country’s central bank.

However, the sudden resignation of Mr Uttama on Wednesday is thought not to be something in Mr Setthaput’s favour. The appointment of yet central bank governor, despite its independent role, is likely to become political as grassroots forces in the new Palang Prcaharat leadership are thought to be looking for a change not only in economic policy but how it is managed.

Flexible and agile candidate with a focus on financial stability says one Bangkok based analyst

Many observers have praised the work of the outgoing bank governor, Mr Veerathai, for strengthening the financial system ahead of this challenge although testing times are undoubtedly ahead. 

Financial stability will be a critical issue as Thailand pursues any chance of economic recovery.

‘He is quite flexible. For example, when economic growth is fine he focuses on financial stability, but when the economy faces contraction, as with the current Covid-19 crisis, he agrees with policy rate cuts,’ said Mr Pipat this week speaking with The Nation newspaper in Bangkok.

Friend and colleague of the outgoing governor

Mr Setthaput is a friend of Mr Veerathai’s.

Both men worked together under the auspices of the International Monetary Fund (IMF) following Thailand’s disastrous 1997 Financial Crisis.

The experience is said to have left an indelible mark on Mr Setthaput who is seen by some observers as conservative but also decisive.

Like Mr Veerathai, he has often referenced Thailand’s growing problem with household and consumer debt while also warning about the corporate bond market which has been challenged by this emergency’s unprecedented impact on economic activity.

Work with the predecessor of Mr Somkid as Finance Minister up until 2001 when Thaksin was elected

Mr Setthaput worked with former Finance Minister Tarrin Nimmanahaeminda, notably less than twenty years ago, the predecessor to Somkid Jatusripitak as Finance Minister who assumed that role in 2001 when Thaksin Shinawatra was first swept to power as Premier promising a new economic start for Thailand that ran counter to IMF policy at the time. 

Mr Somkid is the current government’s economics czar but is tipped to be left out when the Thai cabinet is reshuffled in September.

This will mean an entirely new economic team to tackle the country’s economic situation and problems which many anticipate will take shape in October. 

Moratorium on debts repayments to end in October

This week, outgoing Bank of Thailand Governor, Mr Veerathai, announced that a moratorium on debt repayment imposed by the bank due to the Covid 19 emergency, will expire in October.

It is understood that the bank is concerned that the credit system may be damaged even further by prolonging the relaxed regime as the economy makes tentative steps to get back on its feet.

It is also worth noting that the kingdom has been facing strong economic headwinds now since March 2019 when the US China trade war flared up and indeed, continues to rage.

‘Several financial support schemes will expire in October. We don’t think most SMEs will fall off the cliff, because banks have provided them with more support than the central bank has done, by suspending debt repayment by as much as a year,’ Mr Veerathai explained.

Only ฿103 billion of ฿500 billion soft loan programme to support business has yet been approved

The outgoing central bank boss revealed that only ฿103 billion of a soft loan scheme for commercial banks which, it is hoped, will assist small and medium-sized concerns when reloaned at generous interest rates and repayment terms, has been approved by the bank to date.

The total fund available to the scheme is ฿500 billion.

Mr Veerathai has said that the key focus now is on debt restructuring for firms with adjustments being made to fit with their current cash flow.

Increasingly damaging impact of closed borders

The bank is still predicting, at least, an 8% dip in GDP for Thailand this year.

Senior Director, Don Nakhontab, has highlighted the increasingly damaging impact that the actions by the government to stem the virus threat is having on the county’s valuable foreign tourism industry.

He predicted that the kingdom will be lucky to see 8 million visitors this year, most of whom had already arrived prior to the state of emergency on March 26th last.

He warned that the industry may not recover until the end of next year leaving behind a depressed employment market.

Economy showing signs of mending from July

However, despite the challenge ahead, it is not all bad news.

The central bank has indicated that the deep contraction of the economy experienced in the second half of this year is being reversed in the third quarter as businesses have been getting back to work since July.

The outgoing Bank of Thailand governor said on Wednesday that Thailand’s economy can recover from this catastrophe within two years.

This was based on a vaccine becoming available later this year.

Even with a vaccine, Thailand may have to learn to live with the virus and the economic imperative

Already, Thailand is making progress on its own vaccine while US firm, Moderna, this week, reported its mass vaccine was on track with successful tests on human beings showing the drug boosted immune systems.

It comes as the United States and European countries such as France have, in the last few weeks, acknowledged that there is an economic imperative and at some point, lockdowns and the closure of economic activity must be ruled out.

Mr Veerathai, however, appears to suggest that some level of latent infection from the virus must be anticipated and accepted without fettering the economy.

‘The intermittent outbreaks are also accounted for under the central bank’s predictions,’ he said. ‘New infections of 20 to 30 cases per day are manageable under the country’s public health system.’ 

Further reading:

Somkid ready to bow out of government as September cabinet reshuffle seems to be on the cards

Plans to relaunch tourism from China thrown out as conflicting reports emerge of a new swine flu virus threat

Election of a new ruling party leader, shifts focus now to the future of the economics czar Somkid and his team

Banks ordered to cease dividends and shore up balance sheets on fears of loan quality erosion due to slump

Thai economy in even greater peril as Covid 19 shutdown appears to have had a bigger impact than expected

Election of Prawit as Palang Pracharat leader will see more grassroots politics in government

Emergency decree extended by Thai government but politics behind the scenes abuzz with PPP party heave

92% of suicides due to the virus are among the self-employed according to expert research group in academia

Government moves to clarify that it is not seeking cash from the kingdom’s richest business leaders in overture

Pheu Thai MP calls on Prime Minister to resign as index shows a collapse in business confidence to a 9 year low

Polls show the public becoming more polarised as Deputy PM assures public there is nothing to worry about

Fake news centre ready as rights activists push for the toning down of the Computer Crime Act

Thammanat claims the media attacks on him are a plot to overthrow the Thai government by a network

New Thai cabinet finalised as government set for July launch, PM to retain old hands at the helm