Sethaput Suthiwartnarueput has emphasised, for instance, that the central bank does not approve of using digital assets to pay for goods and services, an approach which appears to be at odds with the latest details emerging on the government Digital Wallet proposal which speaks of blockchain-linked tokens being used to make purchases in a designated 4km radius through an app. 

The Bank of Thailand Governor Sethaput Suthiwartnarueput has in the last week appeared highly critical of the policies being pursued by the incoming government including the planned ฿10,000 Digital Wallet giveaway, a wide-ranging debt moratorium for three years and the emphasis that the new cabinet is placing on achieving ramped up GDP growth. It comes with confirmation that the Thai economy only grew 1.8% in the second quarter and may be facing a ceiling of 3% growth in 2023.

The Governor of the Bank of Thailand Sethaput Suthiwartnarueput is increasingly striking a discordant note when commenting on the policies of the new government including the signature proposal of a ฿10,000 digital giveaway.

Bank of Thailand Governor Sethaput Suthiwartnarueput spoke at a conference in Bangkok last Thursday, where he was forthright in his views about the current policies pursued by the government of Prime Minister Srettha Thavisin, which were not complementary or supportive.

In recent days, the central bank chief made it clear that the Bank of Thailand had not yet properly assessed or reviewed the government’s proposal as to its suitability or prospects for boosting the economy, but he did observe that a more targeted initiative aimed at those who needed funding would place less of a strain on the public finances. 

Government should be prioritising financial stability and private investment in the economy says the Bank Chief in wide-ranging and critical comments

Mr Sethaput also told reporters that the government should be prioritising private investment as opposed to private consumption at this time as the country’s investment situation has been off track for many years, before the pandemic, during it and after it.

The Bank of Thailand governor also made it clear, as has been strongly reiterated in the bank’s policy statements over the last few years, that it does not support digital assets as a means of payment in the economy because of the threats posed by such an approach to the country’s financial stability in the longer term.

Officials concerned that a rising crypto asset trend poses a real threat to Thailand’s financial stability

The proposed Digital Wallet giveaway has not yet been finalised.

It will be launched on February 1st 2024 and for now, the plan revolves around the use of tokens developed through blockchain technology by which all citizens may spend ฿10,000 within a 4 km radius subject to strict terms and conditions through an existing banking app operated by the state-owned Krung Thai Bank.

Digital Wallet not linked to new Digital Currency

The Bank of Thailand boss made it clear that the new proposed digital wallet scheme has no relationship to a planned central bank digital currency which has been proposed by the bank but has not yet been finalised or a launch date set. 

Mr Sethaput was speaking last week at a Bank of Thailand digital finance conference and pointedly said that the government should be more concerned and focused on the economy’s performance in the medium term and the country’s ongoing fiscal stability rather than short-term growth.

The Central Bank has recently revealed that economic growth in the second quarter is even more disappointing than feared, with a GDP growth rate of just 1.8% which puts a current targeted growth rate of 3.6% this year, at this point, nearly out of the question. 

Growth prospects for the economy in 2023 are declining with a figure of only 3% GDP growth now appearing likely, just ahead of last year’s 2.6%

Many analysts now suggest that the country’s output will be lucky to grow 3% in 2023 which will only be a marginal improvement on the 2.6% growth rate achieved in 2022 making Thailand’s economy the laggard of Southeast Asia.

Mr Sethaput told his audience last Thursday that the remit of the Central Bank was to protect the country’s economic growth, price stability and the financial system.

Before the May 14th General Election, Mr Sethaput, who is an appointee of the previous government and was at one point an advisor to General Prayut Chan Ocha, told voters that they should be more concerned about financial stability than economic growth at this time of economic peril around the world.

Warning that Thailand could face a debt credit rating downgrade similar to what happened to the United States this year with Fitch Ratings agency

This week, Mr Sethaput pointed to the recent downgrade of the United States by the ratings agency Fitch as something that Thailand would need to avoid.

‘Fiscal instability would impact our fiscal condition, as happened with the US government, resulting in the recent US debt downgrade,’ Mr Sethaput observed. ‘The central bank does not determine fiscal policy. We are only giving our opinion.’

Nevertheless, Mr Sethaput seemed to express unease at recent measures being announced by the government, such as a move to offer across-the-board debt relief to farmers and small businesses. 

The Finance Ministry, now directly overseen by newly appointed Prime Minister Srettha Thavisin, has announced plans to introduce a suspension of debt repayments for two years for not only small farmers but also small and medium enterprises with loans outstanding of not more than ฿1 million.

Governor voices opposition to wide debt moratorium along the lines of that proposed by the government now for both farming and small business borrowers

Mr Sethaput is warning that such a move, which he described as a blanket approach to debt, could have significant economic side effects for Thailand and consequently could undermine the country’s financial stability.

The Bank of Thailand governor pointed out that in the past eight years alone there had been fourteen debt suspension schemes announced by previous governments and they had little impact on spurring growth or improving the overall performance of the economy.

The new government’s plans to offer repayment moratoriums to farmers and small business concerns are aimed at allowing businesses and small operators who are still struggling from the effects of the pandemic to regain their equilibrium and begin again to power the economy to further growth.

In the course of his pronouncements on Thursday, Mr Sethaput accepted that private consumption was a factor in helping to keep the economy moving forward this year, as well as the country’s foreign tourism industry.

Private consumption growth a key factor in 2023

Economic analysts often overlook this growth in private consumption this year, particularly in the light of lower spending by foreign tourists because of a dearth of visitors from Western markets and a move by the tourism industry towards an Asia-centric profile.

This is one of the reasons why Thailand, which is experiencing falling exports, also recorded a current account deficit in July as a rebounding foreign tourism industry could not offset the losses sustained by the kingdom’s struggling manufacturing and export sectors which represent 60% of GDP. 

The warnings from Mr Sethaput are quite clear and they are directed at the government.

The Bank of Thailand governor has made clear his scepticism about the ฿10,000 baht digital wallet giveaway.

‘All Thai citizens do not need a ฿10,000 cash handout based on necessity. If the scheme is allocated to a targeted segment, it will be easier on the fiscal budget,’ he told reporters.

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