Bank of Thailand urged to slash interest rates amid economic struggle

[webfact]

Pressure is mounting on the Bank of Thailand to ease the economic strain on small and medium-sized enterprises (SMEs) by slashing interest rates on commercial bank loans.

 

Pichai Naripthaphan, deputy chairman of the Pheu Thai Party‘s strategies and politics committee and an advisor to Prime Minister Srettha Thavisin, argued that the central bank needs to acknowledge the real-world challenges people are grappling with. He highlighted the stagnant income levels, rising expenses, and mounting debts that are forcing many to resort to high-interest informal loans.

 

According to the Fiscal Policy Office, Pichai revealed that Thailand’s economic growth in the last quarter of 2023 was a meagre 1.4%, with the overall expansion for the year only reaching 1.8% – a figure he classified as very low. He projected that without government intervention and fresh strategies, the economic growth for the current year will likely follow the same disappointing trajectory.

 

by Alex Morgan

Photo courtesy of Bank of Thailand

 

Full story: The Thaiger 2024-01-30

 

- Cigna offers a range of visa-compliant plans that meet the minimum requirement of medical treatment, including COVID-19, up to THB 3m. For more information on all expat health insurance plans click here.

 

Get our Daily Newsletter - Click HERE to subscribe

 

[Mike Lister]

Only Japan and Switzerland have lower central bank rates than Thailand, reducing them further is foolish, BOT should stand its ground.

[bamnutsak]

from the linked article...

 

In an interview with Reuters last week, the central bank’s governor admitted that growth had underperformed expectations but denied that the economy was in crisis. Pichai, however, challenged this outlook, questioning whether a decade-long trend of underperformance could be dismissed as non-crisis.

 

 

"Decade-long"? Hmm. Tell us again who was "in charge".

 

 

Pichai further highlighted that since Sethaput Suthiwartnarueput assumed the role of central bank governor in 2020, the Thai economy had failed to bounce back from the negative growth experienced that year. 

 

Yes. let's blame the BoT for a series of government's mishandling of the economy.

 

 

 

[Guderian]

5 hours ago, webfact said:

by slashing interest rates

 

Please do, the Baht would tumble, expats and tourists would love it and flock here.

[hotchilli]

4 hours ago, bamnutsak said:

"Decade-long"? Hmm. Tell us again who was "in charge".

In control more like.

[Will B Good]

Baloo desperately needs the economy to be in crisis in order to allow the borrowing for his mental 10k scheme to be approved......and he seems to be prepared to trash the economy to prove it?????

[kingstonkid]

8 hours ago, bamnutsak said:

from the linked article...

 

In an interview with Reuters last week, the central bank’s governor admitted that growth had underperformed expectations but denied that the economy was in crisis. Pichai, however, challenged this outlook, questioning whether a decade-long trend of underperformance could be dismissed as non-crisis.

 

 

"Decade-long"? Hmm. Tell us again who was "in charge".

 

 

Pichai further highlighted that since Sethaput Suthiwartnarueput assumed the role of central bank governor in 2020, the Thai economy had failed to bounce back from the negative growth experienced that year. 

 

Yes. let's blame the BoT for a series of government's mishandling of the economy.

 

 

 

There is only one reason that PTP wants a crisis and that is the money they need for the wallets.

[Pouatchee]

9 hours ago, Mike Lister said:

Only Japan and Switzerland have lower central bank rates than Thailand, reducing them further is foolish, BOT should stand its ground.

 

Sorry, i am pretty ignorant in these matters. if they reduce the rate, how will it affect the bht?

[Mike Lister]

3 minutes ago, Pouatchee said:

 

Sorry, i am pretty ignorant in these matters. if they reduce the rate, how will it affect the bht?

Lower rates of interest make the Baht less interesting as an investment, FDI will still favor higher paying USD interest rates which will result in more capital outflows. Investors want a return (interest) on their funds, THB wont give that, USD will.

[Purdey]

For a country that has an excessive number of people in debt, lowering the interest rate to encourage more borrowing seems a tad unwise. 

[Mike Lister]

7 minutes ago, Purdey said:

For a country that has an excessive number of people in debt, lowering the interest rate to encourage more borrowing seems a tad unwise. 

Lowering the interest rate also lowers the size of loan repayments so is useful to help relieve financial stress. BTW it's the SME's who are clamoring for a rate reduction because it's hurting profitability, it's npt really anything to do with poor people, it rarely is. 

[Gknrd]

I have a friend that flew in from Santiago de Querétaro Mexico last night.  I have not been to her place in a few years and the first thing out of her mouth when I asked about Queretaro was... Get this!  Chinese and South Korean's are taking over. She said they are building factories every where and opening businesses. There is so much work and construction it bringing in thousands of migrants. She also said she hates it. And all the big cities around that area are flooded with Chinese, Koreans, opening factories and businesses.  

She also said they don't want to leave, they are marrying the women doing everything possible to stay in Mexico and not go home. 

Thailand is dropping off the map. It could have been a hub of commerce but it favored China. Now that whole region is in a downward spiral. 

Even the Asian business people with money don't want to live and invest there anymore. They want out!

I keep a home in Southern Texas and it is the same here. One of the richest areas for commerce in the world at the moment. 

That whole area in SE Asia fragmenting and China has dragged down the economy and will continue to drag it down IMO. 

No one wants to live there and put up with an Autocracy not even the Chinese. And Thailand is to far gone to ever recover at this point.

[alex8912]

3 hours ago, Gknrd said:

I have a friend that flew in from Santiago de Querétaro Mexico last night.  I have not been to her place in a few years and the first thing out of her mouth when I asked about Queretaro was... Get this!  Chinese and South Korean's are taking over. She said they are building factories every where and opening businesses. There is so much work and construction it bringing in thousands of migrants. She also said she hates it. And all the big cities around that area are flooded with Chinese, Koreans, opening factories and businesses.  

She also said they don't want to leave, they are marrying the women doing everything possible to stay in Mexico and not go home. 

Thailand is dropping off the map. It could have been a hub of commerce but it favored China. Now that whole region is in a downward spiral. 

Even the Asian business people with money don't want to live and invest there anymore. They want out!

I keep a home in Southern Texas and it is the same here. One of the richest areas for commerce in the world at the moment. 

That whole area in SE Asia fragmenting and China has dragged down the economy and will continue to drag it down IMO. 

No one wants to live there and put up with an Autocracy not even the Chinese. And Thailand is to far gone to ever recover at this point.

Seems like thousands of migrants are missing out on good jobs but keep flooding the USA according to your  post. I wonder if CNN or BBC or MSN will do stories about amazing missed opportunities! 

[Gknrd]

37 minutes ago, alex8912 said:

Seems like thousands of migrants are missing out on good jobs but keep flooding the USA according to your  post. I wonder if CNN or BBC or MSN will do stories about amazing missed opportunities! 

Common knowledge here?  Only the scum want in the US.  Most migrants are stopping in Mexico now. Yesterday I was at Home Depot . First time for me to see migrants wanting jobs in the parking lot. From Venezuela . They are overrunning Colombia. At first Colombians hired them, most let them go. Saying they were worthless. Now, seems they are coming to the US for free hand outs. Hard working and talented , skilled workers are not coming to the US. Mexicans love their country.  Contrary to the media portrayal.

Mexico is the new China, China is history.

[sezze]

Common knowledge , immigrants go for the easiest money , the closest to home . Now in case of Latin immigrants , Mexico is a good base , as it serves the same language and is a lot more hassle free then US . However money is more abundant in US , so it is still a choice between the 2 .

For Asia it is a different matter . China is a dragon , it is huuuge , and some have tons of money . The dragon however does have some growing pains , which leads to very small feet to stand on . Evergrande just went into bankruptcy.  It does drag some investors out much further then Asia , since many cash is directly or indirectly related to it. Thailand is a prime victim , since many investors are Chinese and family related and also , money in Thailand is also nicely flowing ( Thailand is after Singapore the biggest/best economy in SE Asia).

This all relates to Thailand being vulnerable to China , and now its weakening performance.

[Mike Lister]

14 hours ago, Pouatchee said:

 

Sorry, i am pretty ignorant in these matters. if they reduce the rate, how will it affect the bht?

My turn to be sorry.....you asked me a question that I only partially answered, your question was more about the impact on THB.

 

The value of THB is determined almost exclusively by the value of USD, there isn't much that can be done to change that. Interest rate differentials play a role but not a huge one. When the US prime rate is 5.25% and the BOT rate is 2.25%, hot money will flow into USD because it offers a better return but that in itself doesn't directly impact USD/THB. It is the across the board strengthening or weakening of USD that effects the USD/THB exchange rate and that's best measured using the Dollar Index. A reduction in the BOT rate alone wont cause the Baht to weaken or strengthen because USD is so huge and THB is so small. If you want to see that relationship directly, compare a 3 or 5 year chart of USD/THB against a chart of the USDI over the same period, they both have the same profile. 

 

But I strongly suspect you already knew these things so this is mostly for the benefit of others who didn't. 🙂

[kingstonkid]

16 hours ago, Pouatchee said:

 

Sorry, i am pretty ignorant in these matters. if they reduce the rate, how will it affect the bht?

Lowering the national bank rate affects usually the rate that the average bank charges.  

 

In Canada there are interest rates that are the national rate plus x%

 

Therefore the bank rate lowering here lowers the cost of borrowing that the Elite have to pay.  As well as businesses having access to a lower borrowing rate there fore making more money for the banks.

[CaptainPeacock]

5 hours ago, Mike Lister said:

 BOT rate is 2.25%, .......................

 

 

 

so WHY I'm i ONLY getting 0.6% in my Thai government housing deposit bank acc ?

 

YET in the UK:  Bank Base Rate is currently 5.25%...i get 5.15% on my instant access acc!

 

I'm really starting to wonder if the Thais are MORE 'kinyoo' than us westerners...🫢😋

 

[Mike Lister]

6 minutes ago, CaptainPeacock said:

 

so WHY I'm i ONLY getting 0.6% in my Thai government housing deposit bank acc ?

 

YET in the UK:  Bank Base Rate is currently 5.25%...i get 5.15% on my instant access acc!

 

I'm really starting to wonder if the Thais are MORE 'kinyoo' than us westerners...🫢😋

 

Banks in Thailand are not obliged to follow the rate set by BOT and since their is no international competition inside Thailand, banks can pay whatever level of interest they wish.

[Purdey]

I suppose raising rates will impact those with loans now, which suddenly become expensive (unless fixed rate).

I am simply guessing that raising rates will create more non-performing loans in this case.

I wonder sometimes if it isn't always the interest rates that affects economic growth but also the quality of the borrowers, who shouldn't have been allowed to get into debt in the first place.

[mommysboy]

QE would be a better option imo. 

 

 

[spidermike007]

There is no question the economy is in big trouble here. If you look at industrial utilization as one aspect of economic productivity it really tells the tale. The "Prayuth Decimation" continues, and there does not appear to be anything Big Sretta can do to stop it. 

 

Capacity Utilization in Thailand decreased to 56.27 points in December from 57.24 points in November of 2023. Capacity Utilization in Thailand averaged 68.59 points from 2000 until 2023, reaching an all time high of 78.07 points in January of 2008 and a record low of 49.21 points in November of 2011.

 

https://tradingeconomics.com/thailand/capacity-utilization

[Mike Lister]

10 minutes ago, mommysboy said:

QE would be a better option imo. 

 

 

It's possible we could see that if there is a liquidity crisis, it wouldn't be the first time a central bank injected money into bank balance sheets.

[Mike Lister]

4 minutes ago, spidermike007 said:

There is no question the economy is in big trouble here. If you look at industrial utilization as one aspect of economic productivity it really tells the tale. The "Prayuth Decimation" continues, and there does not appear to be anything Big Sretta can do to stop it. 

 

Capacity Utilization in Thailand decreased to 56.27 points in December from 57.24 points in November of 2023. Capacity Utilization in Thailand averaged 68.59 points from 2000 until 2023, reaching an all time high of 78.07 points in January of 2008 and a record low of 49.21 points in November of 2011.

 

https://tradingeconomics.com/thailand/capacity-utilization

That's very interesting, I'd heard about that but never paid any real attention to it until Charchai mentioned it in his column, that's a really sad looking graph!

[spidermike007]

1 minute ago, Mike Lister said:

That's very interesting, I'd heard about that but never paid any real attention to it until Charchai mentioned it in his column, that's a really sad looking graph!

You can dress a skeleton up in fancy clothes, but at the end of the day it's still a skeleton. Pretending that something is something else, does not change the reality one iota. 

[luckyblock token]

any rate over 0.5 percent is nonsense and just plain criminal.

 

 

 

[Mike Lister]

3 hours ago, spidermike007 said:

You can dress a skeleton up in fancy clothes, but at the end of the day it's still a skeleton. Pretending that something is something else, does not change the reality one iota. 

OK but we need to go to the next level down on this, the reason that industrial utilisation has dropped off is because of the lack of demand globally. It's fallen from 70% to circa 55%, not because of something that Thailand has or hasn't done but because external demand has not recovered, especially China. Remember, Thailand's economy is based on the export of goods and services which needs an overseas market in order to function normally. 

[Gknrd]

Thailand is on their way out, China will drag them down to levels of 20 years ago. And the powers in charge will never change course. It would mean they were wrong.