(Corrects second bullet point to say ‘can’t fix everything’, not can)
By Orathai Sriring and Kitiphong Thaichareon
BANGKOK : There is room for a rate cut in Thailand as inflation is low though it is ultimately the central bank’s decision, the finance minister said on Tuesday as he reiterated his call for monetary and fiscal policy to work together to support the economy.
Finance Minister Pichai Chunhavajira also told a business forum that he wanted the baht to stabilise at a weaker level to support the economy, which he said could grow 4 per cent to 5 per cent next year if policy was properly coordinated.
He expected growth this year would be between 2.6 per cent and 2.8 per cent.
Thailand’s economy grew an annual 3 per cent in the July-September quarter, the fastest pace in two years and beating expectations, but officials and analysts see increased challenges to maintaining the momentum next year.
Speaking to reporters after his speech, Pichai said he wanted a rate cut to follow the one in October, but said the decision would depend on the Bank of Thailand’s (BOT) monetary policy committee.
“I would like to see interest rates reduced further, but whether it will be at the next meeting, I don’t know,” he said.
In October, the BOT unexpectedly cut the key interest rate by a quarter point to 2.25 per cent. The next policy review is on Dec. 18.
For the January-October period, average annual headline inflation was only 0.26 per cent, well below the central bank’s target range of 1 per cent to 3 per cent.
The International Monetary Fund said last week a further rate reduction would support Thailand’s economic recovery.
At a separate event, Governor Sethaput Suthiwartnarueput said a mix of policies was needed to manage the economy as interest rates alone cannot address everything.
“Interest rates alone can’t solve all the problems. Implementing a resilient policy must be supplemented with other measures,” he said. “We want to implement a robust policy.”
Monetary policy will be determined by the economic outlook rather than being data driven, Sethaput said, adding the BOT was not focusing on giving forward guidance.
“Data has noise, uncertainty and volatility. If we base our policy decisions on the data that comes out, it will make the policy unstable,” he added.
The governor also flagged that measures to help tackle high household debt levels would be announced on Dec. 11.
Pichai also said he was looking at reducing personal and corporate taxes to improve Thailand’s competitiveness, and increasing the value-added tax rate.
Thailand’s corporate tax is set at 20 per cent and personal tax rates are as high as 35 per cent, while the VAT is currently 7 per cent.
(This story has been corrected to say ‘can’t fix everything’, not ‘can’, in bullet point 2)
