Thailand’s economic challenge: short-term relief vs long-term structural woes

[webfact]

 

The 5:2 vote by the Thai central bank’s Monetary Policy Committee (MPC) to hold the key policy rate at 2.50 per cent is a hint of an impending rate cut at their next meeting, according to some economists. 

 

The MPC decision in January disappointed Prime Minister Srettha Thavisin and his aides who had been forcefully arguing for the rate cut.

 

Srettha, who is also finance minister, said that he could not interfere with the Bank of Thailand (BOT)’s independence.

 

Two of the MPC members voted for a rate cut because inflation has been negative and economic growth has slowed down.

 

The majority of MPC members, however, cited many reasons for leaving the rate unchanged. They argued that though headline inflation was in negative territory for four consecutive months, core inflation remained positive. They also said that they wanted to guard financial stability as a lower rate could encourage people to undertake risky investments or borrow more.

 

State of the Thai economy 

 

While the government has been explicit that the economy is heading for a crisis, its opinion is at odds with that of the BOT, which sees recovery albeit uneven with some sectors still struggling for survival. While the government is focusing on short-term stimulus and is calling for a rate cut, the BOT believes accumulated issues could not be solved merely by lowering the interest rate.

 

By Thai PBS World’s Business Desk

 

Full story: Thai PBS 2024-02-19

 

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[hotchilli]

3 hours ago, webfact said:

State of the Thai economy 

 

While the government has been explicit that the economy is heading for a crisis, its opinion is at odds with that of the BOT, which sees recovery albeit uneven with some sectors still struggling for survival. While the government is focusing on short-term stimulus and is calling for a rate cut, the BOT believes accumulated issues could not be solved merely by lowering the interest rate.

The real issue with the Thai economy is that the wealth gap has destroyed the "middle class"

The middle class have always been the majority that buys products, products that are manufactured by the majority of middle/ upper middle and high class businesses.

The middle class is now virtually non-existent, companies are going to the wall because they cannot sell products, no-one is buying in the same quantities as before. Those who had a smaller business lost everything and now join the lower class.

The high class elite already have everything they need and invest the bulk of their money, sitting on millions and billions.

More and more businesses will go bankrupt thus depleting the middle class even more.

It's a downward spiral, the perfect storm.

Short term stimulus packages achieved nothing, will never achieve anything.