The Bank of Thailand is by statute independent of the government but reportedly works closely with the Prime Minister’s economic team including the Ministry of Finance on policies relating to debt restructuring and digital assets while also offering guidance. Governor Sethaput served as an economic advisor to General Prayut Chan ocha before taking up his current role.

The Governor of the Bank of Thailand Sethaput Suthiwartnarueput in recent days came as close as possible, given the political neutrality required by the bank boss to preserve the bank’s independent status, to criticising populist policies being put before the electorate in the run-up to the May 14th General Election. Governor Sethaput said what Thailand’s economy needs right now is to safeguard the country’s financial stability instead of short-term fiscal stimulus which burdens the kingdom’s prospects by elevating public debt. He also pointed out that even for that, even though he supported such measures, it was only for targeted handouts aimed at the less well-off.

Governor Sethaput Suthiwartnarueput expressed concern that a hyper and broad-based policy of financial stimulus or giveaways will drive up public debt and give only a short-term boost to the economy, burdening future growth and exacerbating the country’s chronic structural problems, not least by increasing public debt. He called for more sustainable policies and welfare stimulus targeted at the less well-off.

Thailand’s independent Bank of Thailand governor, on Tuesday, appeared to warn voters off the populist policies being pursued by parties in the current General Election which is scheduled for May 14th next with the opposition well ahead in the opinion polls.

The central bank had previously confirmed that it is preparing to work with the new government in economic policy for the kingdom going forward, in the Summer period, no matter what its makeup may be.

Sethaput Suthiwartnarueput said that although fiscal stimulus can be of value to the economy in the short term, the current priority for Thailand had to be the preservation of financial stability in the country and the need to address instead its long-term structural problems.

Preserving stability must be the priority now for the government says Bank of Thailand boss as concerns grow over General Election populist policies

‘The most important thing now is not stimulating the economy, it’s preserving our stability,’ he stated bluntly amid warnings over the last week of higher debt repayment commitments for any potential government between now and 2027 as well as an international banking system across the world where the danger of an unforeseen shock has risen substantially in the last six months.

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58-year-old Mr Sethaput, who worked as an advisor to Prime Minister Prayut Chan ocha from March 2020 until his appointment to his current role later that year on October 1st, appeared to target the controversial Pheu Thai digital wallet universal policy of paying out ฿10,000 to each Thai national from the start of 2024 when he suggested that targeted welfare payments to ameliorate social inequality were a better proposition for Thailand.

Bank of Thailand is independent of the government but reportedly works very closely with the Ministry of Finance on key issues and also gives its input

The Bank of Thailand is, by statute in the kingdom, independent of government but it is reported to be working closely with the Ministry of Finance in recent years on the ongoing economic recovery and giving the government its input on what it considers sound economic policy.

The bank has also worked closely with the ministry on debt restructuring programmes for business after the pandemic and new policies when it comes to digital currencies while key decisions on interest rates or monetary policy are the bailiwick of the bank’s powerful Monetary Policy Committee.

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At a recent press briefing, Prime Minister Prayut Chan ocha complained that his government has not been given enough credit in the run-up to the election for its prudent management of government finances.

Bank of Thailand boss suggested stimulus spending be targeted at the less well-off while the government should focus more on infrastructural spending

‘The populist policies tend to boost the economy too much,’ Bank of Thailand boss Mr Sethaput asserted this week. ‘What we shouldn’t do is the broad-based subsidies, which will benefit those who shouldn’t get it. The money should be used efficiently.’

He also advocated more of an emphasis on public funding towards infrastructural development which may assist in catering for what he termed ‘sustainable’ income and livelihoods for Thai people.

At the same time, he contended that populist policies only offer a short-term boost while burdening the overall economy going forward with higher public sector debt levels.

The senior banker stressed that public policy pushed by the government needs to strengthen financial stability and lay the groundwork for future and more sustainable growth.

Mr Sethaput said he did support fiscal stimulus measures where such proposals target the less well-off in line with policies advocated by the IMF and World Bank.

‘We can still have populist policies, but they should be focused on providing a safety net for Thai citizens at an appropriate level,’ he said.

Bank reasserts projected GDP growth of 3.6% for 2023 driven by domestic spending and the foreign tourism sector recovery, points to lower unemployment

The bank insists that the economy is still on target to achieve 3.6% GDP growth this year compared to a Fitch Rating report of 3% last week and the current International Monetary Fund (IMF) estimate of 3.4%.

The bank suggests that growth will be 2.9% in the first half of 2023 and 4.3% in the last six months with currently retarded export output expected to recover.

It said that this would be led by higher domestic spending and a continued strengthening of foreign tourism demand.

The banker explained that the country’s economic recovery can be seen by an unemployment rate of 6.2 million seen in 2020 when the economy suffered a 12.3% contraction at the beginning of that year compared to a corresponding figure of 2.6 million in the last three months of 2022.

Caution about exports pick up and farm incomes

He also cautioned that while farming income is poised to rise by 1.6% in the opening half of 2023, it may fall by as much as 6.1% in the second half due to an imbalance of growth in 2022 which raised the base artificially higher.

The extent to which economic growth this year will be foreign tourism related can be seen from the Bank of Thailand’s projections on exports which he accepted were due to contract by 7.1% in the opening half of 2023 following a sharp downward trend also in the last quarter of 2022 followed by a projected pickup of 4.1% in the second half of the year.

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Further reading:

Financial markets debt sell-off sending a signal to Thailand before the May 14th General Election

PM warns giveaway policies of some parties may be ‘bad karma’ for the country in the longer run

Economic recovery shaky despite strong foreign tourism as global economic outlook deteriorates

Recession fears rise as growth projections are cut and export output continues to decline in 2023

Good news on foreign investment at the start of 2023 fails to mask stunted competitiveness issue for economy

Economy faces export clogs with rules in China and ‘green imperialism’ from European Union

Vital European Union free trade deal with Thailand with stiff demands from Brussels to take time

Thailand’s financials are sound but the economy is exposed if another world banking crisis emerges

Thai economic woes grow with a 10-year high trade deficit as January exports slumped by 4.5%

Credit crunch as firms seek more bank loans with tightened lending criteria and recession fears

Even as the baht surges, Thailand faces economic recession in mid-2023 with lower earnings

Thailand’s trade agenda may be complicated and thwarted by raised tensions in the Indo Pacific region

US is a better friend for Thailand than China says US ambassador as tensions grow between the 2 powers

Industry boss urges Thailand to join alternative Pacific trade pact and plan for a long recovery from virus debacle

MPs warned of an economic colony as opposition zeroed in on Thailand’s impaired relationship with China