Thailand: BoT calls for stable policies
Public confidence is more important than the new face of the upcoming coalition government and the new prime minister, while policy normalisation and the stability of fiscal and monetary policies are still required from the new government rather than economic stimulus, according to the governor of the Bank of Thailand.
Confidence would resume given the formation of the new government within the existing timeline, together with the prompt implementation of its policies. However, the Bank of Thailand has included political factors in its economic outlook assessment, said Sethaput Suthiwartnarueput, governor of the central bank.
The Bank of Thailand estimates the new government formation may be delayed by up to three months from the existing timeline of August. Under this scenario, the 2024 fiscal budget disbursement would also be delayed to the first quarter of next year from the existing schedule of the fourth quarter of 2023. However, it would not affect the Thai economic outlook for 2023 and the central bank would keep its economic assessment unchanged.
The central bank anticipates a Thai GDP growth rate for 2023 of 3.6%, primarily attributed to the rebounding tourism sector with a projection of 29 million foreign tourists for this year. In the first half of the year, foreign visitors were higher than expected and have continued to show positive signs in the second half.
Even though Chinese tourists may decline in the second half of the year compared to the first half due to China’s slower than anticipated economic recovery, other international tourists would support Thai economic growth in line with the central bank’s projection, Mr Sethaput said.
“Given that the Thai economic recovery path is intact, economic stimulus is not needed from the new government. In addition, policy normalisation and stability of both fiscal and monetary policies are necessary to grow the economy sustainably over the long term,” Mr Sethaput said.
He said the Bank of Thailand would continue to use monetary policy normalisation to contain inflation, especially the headline rate. Even though inflation has been declining for the past two months, the low rate would stay only for the short term and is expected to increase later. Economic growth, rebounding tourism and the new government’s policies would spur inflation.
Under policy normalisation, the central bank has paid more attention to swelling household debt after the debt ratio increased to 90.6% of GDP. The Bank of Thailand is scheduled to release a consultation paper on household debt resolution in the third quarter of this year, and enforce responsible lending guidelines next January, followed by guidelines to solve persistent debt in April 2024.
According to a measure for persistent debt management, the central bank will allow personal loan borrowers to change from revolving loan schemes to term loans, with a ceiling rate of 15% per year.
The measure would enable persistent debt borrowers to exit from the debt cycle within five years, Mr Sethaput said.
The central bank defines persistent debt borrowers as those paying more interest than the principle for five years. The majority of persistent debt borrowers are lower-income earners.
The ceiling rate for revolving personal loans is currently set at 25% per year.