BANGKOK, – Thailand’s new Finance Minister plans to meet the central bank governor on Thursday, having taken a conciliatory tone in a long-running public disagreement between the government and the Bank of Thailand over the setting of interest rates.
For months, Prime Minister Srettha Thavisin has pushed for an interest rate cut, saying it would help the economy. The central bank has not bowed to the pressure, holding its key rate at a decade-high of 2.50%. The next rate review is on June 12.
Pichai Chunhavajira, who was appointed finance minister last month, has downplayed the clash, saying last week there would be no attempt to replace the central bank’s governor or weaken its independence.
Separately, Deputy Finance Minister Paopoom Rojanasakul told reporters the central bank and finance ministry disagreed in their assessments of the economy.
He said the two needed to talk more to resolve their differences, because fiscal and monetary policy needed to work together to achieve the government’s goals.
Southeast Asia’s second-largest economy unexpectedly shrank 0.6% in the final quarter of 2023 from the third quarter. Full-year 2023 growth was 1.9%, slower than the 2.5% expansion in 2022.
The finance ministry last month cut its 2024 economic growth forecast to 2.4% from 2.8%, but said it could reach 3.3% if the government’s 500 billion baht household stimulus plan is deployed in the fourth quarter as planned.
Economic growth will pick up in the second half of 2024 after the stimulus programme is launched, Paopoom said.
The central bank has said a rate cut and fiscal stimulus would not fix sluggish growth, and it favours structural reforms to increase productivity.
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