CEO Morning Brief

Thai Finance Minister Says Lack of Access to Finance More Worrying Than Rates

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Publish date: Fri, 17 May 2024, 10:53 AM
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TheEdge CEO Morning Brief

BANGKOK (May 16): Thailand's new finance minister said he is more worried about people's access to finance than interest rates, after meeting with the Bank of Thailand (BOT) on Thursday in a bid to better coordinate fiscal and monetary policies after a public spat.

Pichai Chunhavajira, who was appointed finance minister last month, said the central bank was free to decide its key interest rate, after a nearly two-hour meeting with BOT governor Sethaput Suthiwartnarueput.

"The real problem for people or businesses that we're concerned about is the lack of access to finance," he said.

For months, Prime Minister Srettha Thavisin has pushed for a rate cut, saying it would help the economy. The central bank has not bowed to the pressure, holding its key rate at a more than decade-high of 2.50%. The next rate review is on June 12.

After a plea from Srettha, commercial banks last month cut lending rates by 25 basis points for 'vulnerable groups'.

Pichai said that as a former central bank board member, he understood the BOT's work and "was speaking the same language". He said he and the Governor would speak more often.

Pichai has previously sought to downplay the policy clash, saying last week there would be no attempt to replace the central bank's governor or weaken its independence.

On Thursday, he said the BOT would review its inflation target range of 1% to 3%. The range is reviewed every year.

In April, annual inflation turned positive for the first time in seven months, but still remained below the central bank's target for the 12th consecutive month. The BOT has said prices have been low due to government energy subsidies.

The central bank has previously said that rate cuts and fiscal stimulus would not help the economy much, and it favoured structural reforms to increase productivity.

Pichai said he discussed economic restructuring with the BOT governor, but fiscal policy, including the government's controversial 500 billion baht (RM64.6 billion) household stimulus plan, was not canvassed.

The finance ministry last month cut its 2024 growth forecast to 2.4% from 2.8%, but said it could reach 3.3% if the household stimulus scheme is deployed in the fourth quarter as planned.

Southeast Asia's second-largest economy unexpectedly shrank 0.6% in the final quarter of 2023 from the third quarter. Full-year growth slowed to 1.9% from 2.5% in 2022.

Source: TheEdge - 17 May 2024

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