Sethaput Suthiwartnarueput - Bank of Thailand Governor | Thai PBS World Exclusive
Summary
TLDRThe Governor of the Bank of Thailand discusses the country's economic situation, forecasting a 2.5 to 3% GDP growth for the year, influenced by structural challenges and weaker cyclical tailwinds. Key concerns include manufacturing, exports, and tourism, with a heavy reliance on China affecting these sectors. The Governor emphasizes the need for medium-term structural reforms to diversify Thailand's economy and attract foreign investment, while also addressing the creative tension between the government's growth focus and the central bank's stability mandate.
Takeaways
- 📈 The Bank of Thailand's interim economic forecast for the year is a GDP growth between 2.5% to 3%, which is lower than initially expected but still indicates positive growth.
- 🌐 Structural headwinds and weaker cyclical tailwinds are impacting Thailand's economic recovery, particularly in exports which haven't recovered as strongly as anticipated.
- 🏭 The Governor's immediate concern is the performance of manufacturing and exports, along with tourism, which are key drivers of Thailand's economy.
- 🇨🇳 China plays a significant role in Thailand's economy, accounting for 12% of exports and about a third of tourists, making its economic situation closely watched by Thai authorities.
- 💵 Thailand's reliance on China is substantial, and there is a need for medium-term structural reforms to diversify and find new engines of growth.
- 🔄 The geopolitical tension and discussions around friend-shoring, near-shoring, and reshoring present opportunities for Thailand to realign and take advantage of its relationships with major powers like China and the US.
- 📉 Thailand's market share for attracting foreign direct investment has been dropping, indicating a need to make the country more attractive to investors.
- 🌱 Focusing on sustainability, including renewable energy, is important for attracting foreign direct investment to Thailand.
- 📜 Signing and implementing free trade agreements is crucial for countries looking to invest, and Thailand needs to improve in this area to boost its economy.
- 🏢 Thailand needs to liberalize its regulatory and legal regimes to become more business-friendly and attractive to foreign investors.
- 🏛️ The relationship between the Bank of Thailand and the Prime Minister is professional and cordial, with a natural tension due to their different roles and mandates.
Q & A
What is the current economic forecast for Thailand in terms of GDP growth?
-The Bank of Thailand's interim guidance for the economic forecast this year is expecting GDP growth in the range of 2.5 to 3%, which is lower than previously forecasted but still indicates positive growth.
What are the main factors contributing to the weaker economic recovery in Thailand?
-The weaker recovery is attributed to both structural headwinds and weaker cyclical tailwinds. Exports have not performed as expected, and there are structural challenges along with competition from China in third countries.
What is the Bank of Thailand's immediate concern in the near term?
-The immediate concern is related to manufacturing and exports, as well as tourism, which are key drivers for the Thai economy. The situation in China is closely monitored as it significantly impacts these areas.
How does the recovery of tourism in Thailand compare to pre-pandemic levels?
-Tourists are returning, but they are spending less than expected, which is a constraint on the economy's recovery.
What is the significance of China's economy to Thailand's economic outlook?
-China is a significant factor in Thailand's outlook as it accounts for about 12% of Thai exports and a third of its tourists.
What steps can Thailand take to reduce its reliance on China's economy?
-Thailand can engage in medium-term structural reforms to find new engines of growth and diversify its reliance. It can also take advantage of geopolitical tensions by positioning itself as a friend-shoring or near-shoring destination.
How does the Bank of Thailand view the competition with other Southeast Asian countries for foreign direct investment?
-Thailand has seen its market share for attracting FDI drop over the years, and it needs to make itself more attractive by improving its regulatory and legal regimes, signing free trade agreements, and ensuring a sustainable energy source.
What is the relationship like between the Bank of Thailand and the Prime Minister?
-The relationship is described as professional and cordial, with a mutual respect. However, there is a natural tension between the government and the central bank due to their different roles and priorities.
How does the Bank of Thailand's Monetary Policy Committee operate?
-The Monetary Policy Committee in Thailand is composed of seven people, with four being outside members. The decisions on interest rates are made collectively by the committee, not unilaterally by the governor.
What is the Bank of Thailand's stance on lowering interest rates to stimulate the economy?
-While lowering interest rates could stimulate the economy, the Bank of Thailand must balance this with considerations of financial stability and household debt levels. The stimulative impact may not be as large due to structural factors affecting growth.
How does the Bank of Thailand's interest rate compare to other countries around the world?
-At 2.5%, Thailand's policy rate is not alarmingly high compared to other countries and is among the lowest globally, with only Japan and Switzerland having lower rates.
Outlines
📈 Economic Outlook and Challenges for Thailand
The Governor of Thailand discusses the country's current economic situation, forecasting a GDP growth of 2.5 to 3% for the year, which is lower than expected but still positive. He acknowledges the recovery has been weaker due to structural headwinds and weaker cyclical tailwinds, particularly in exports. The Governor expresses concern over the near-term outlook for manufacturing, exports, and tourism, which are key drivers of the economy. He highlights the importance of China's economic situation, as it significantly impacts Thailand's exports and tourism. The Governor also stresses the need for medium-term structural reforms to diversify Thailand's economic reliance and mentions geopolitical tensions affecting global trade.
🌐 Geopolitical Relations and Economic Strategy
The script continues with the Governor discussing Thailand's geopolitical relations, particularly with China and the United States. He notes Thailand's advantageous position due to its close ties with both superpowers. The Governor also mentions the importance of Japan, which has a significant investment in Thailand. He discusses the need for Thailand to become more attractive to foreign direct investment by improving its business environment, signing free trade agreements, and increasing the use of renewable energy. The Governor acknowledges that Thailand has not fully capitalized on its relationships with these major powers and suggests that there is room for improvement.
🤝 Collaboration and Creative Tension with Government
The Governor talks about his professional and cordial relationship with the Prime Minister, emphasizing the different roles they play. He describes the 'creative tension' between the government, which favors growth, and the central bank, which focuses on stability. He explains that while there is pressure from the government to reduce interest rates to stimulate the economy, the central bank must consider a broader set of factors, including inflation and financial stability. The Governor also discusses the collaborative relationship between the central bank and other economic planning agencies in Thailand.
📉 Balancing Growth and Stability in Monetary Policy
In this paragraph, the Governor explains the central bank's flexible inflation targeting framework, which considers growth, inflation, and financial stability when making interest rate decisions. He argues that while lowering interest rates could stimulate the economy, it must be balanced against the risk of increasing household debt, which is already high. The Governor points out that the reasons for Thailand's economic underperformance are not directly related to interest rates but rather to structural factors and global economic conditions. He concludes by stating that despite being referred to as 'decade-high', Thailand's interest rates are among the lowest globally, and the decision to maintain rates is based on a comprehensive assessment of domestic factors.
Mindmap
Keywords
💡Economic Forecast
💡GDP Growth
💡Structural Headwinds
💡Cyclical Tailwinds
💡Manufacturing and Exports
💡Tourism
💡China's Economy
💡Structural Reforms
💡Foreign Direct Investment (FDI)
💡Free Trade Agreements
💡Interest Rates
💡Household Debt
Highlights
Thailand's GDP growth forecast for the year is between 2.5 to 3%, indicating ongoing recovery but weaker than expected.
Structural headwinds and weaker cyclical tailwinds have affected Thailand's economic recovery.
Exports and tourism are key drivers of Thailand's economy, with domestic consumption holding up well.
China's economic situation significantly impacts Thailand's exports and tourism.
Thailand's reliance on China's economy is substantial, with China accounting for 12% of exports and a third of tourists.
Thailand's central bank governor discusses the need for medium-term structural reforms to diversify economic reliance.
Thailand's geopolitical position could be advantageous amidst global realignments and tensions.
Thailand has strong relations with both China and the United States, which could be leveraged for economic benefits.
Japan's significant Foreign Direct Investment (FDI) in Thailand could be a strategic advantage.
Thailand's market share for attracting FDI has been dropping, indicating a need for more attractive policies.
Sustainability and renewable energy are important factors for foreign investors considering Thailand.
Thailand needs to sign and implement more Free Trade Agreements to attract investment.
Regulatory and legal reforms are necessary to make Thailand more business-friendly for foreign investors.
The central bank's relationship with the Prime Minister is professional and cordial, despite differing roles and views.
The Bank of Thailand operates under a flexible inflation targeting framework, balancing growth, inflation, and financial stability.
Lowering interest rates could stimulate the economy, but must be balanced with financial stability considerations.
Thailand's high household debt is a concern for long-term financial stability.
The stimulative impact of lowering interest rates might not be significant due to structural issues affecting growth.
Thailand's policy rates are among the lowest globally, despite being referred to as decade-high domestically.
Transcripts
Governor said put how is Thailand doing
in terms of its
economic
situation and the forecast that the bank
of Thailand is giving to 2024 yeah our
interm guidance for the economic
forecast this year uh which we put out
the last NPC statement um pending our
official release at the next NPC meeting
in April was we expect to see GDP growth
this year in the range of 2.5 to 3% M
which is uh not great it's a bit lower
than what we had to forecast but it's
still uh uh it's still growth positive
growth and it's a ongoing recovery um we
have to say that again um the recovery
has been weaker than we had expected um
I think uh we're we're being hit both by
a lot of uh structural headwinds as well
as weaker cyclical Tailwinds a lot of
the things that we expected to see in
terms of um a stronger recovery in terms
of exports Haven panned out the way we
expected and I think we're facing again
um a lot of structural challenges as
well MH as the governor of the Central
Bank what's your main concern now
immediate immediate or medium term ah
okay in the next way year or so yeah
okay uh my immediate near-term concern
is is again has a lot to do with what
what's going to happen in terms of our
manufacturing and exports um and and and
tourism because those are the key
drivers for our economy right now
domestic consumption has held up quite
well but the things that that we're
looking forward to to try to help
sustain a recovery are exports and and
tourism and a big player in that and a
big uh um uh uh key key factor in that
is is is China of course so um yeah
we're paying very close attention to
what what what's happening in China and
and how uh it affects us both again in
terms of our exports to China uh also to
third countries because we see um
increased competition from China in
third countries that we export to yes
and also in terms of uh the recovery in
tourism because we see the tourists
coming back yeah uh but they're spending
less so that's another constraint on us
as well and we also see again I think
that China seems to be encouraging uh
their people to travel more well also to
spend more domestically to to um travel
domestically rather than go overseas uh
so I think those are some changes that
that will affect us uh in terms of the
Outlook so Thailand's Reliance on
China's economy is quite heavy yeah what
is the way out of that it takes time of
course but yeah there must be some kind
of yeah Advanced plan planning yeah to
see whether Thailand can balance its
okay baskets of Interest yeah yeah in
the near term again given where we are
um and I said your first question about
the near-term Outlook uh so much of it
is is is tied to what happens with uh
China um because uh China is about uh
12% of our exports and about a third of
our tourists and tourism is such a huge
footprint not just in terms of headline
GDP but in terms of employment and
incomes here in Thailand so it has a a
big a big factor but the thing that that
will help is is again to engage in um
medium-term structural yeah reforms to
try to try to find new engines of growth
um to try to diversify uh again our our
our our Reliance and and on this I have
to say I think we we we have some
advantages on this front uh we just need
to realize them uh actualize we have
advantages that we don't know about no
well we we know about them but we're not
taking full advantage of them as as as
we should such as as we know right now
there's a lot of geopolitical tension
right um and you know this talk about
friend Shoring near Shoring reshoring
all that stuff MH and know the dangers
that the the world is trying to to
bifurcate in a sense um um uh um along
along um the lines that that we know but
if you look at that um I would argue
that Thailand is we're actually not that
poorly positioned to take advantage of
some of those um that realignment right
why because if you look at Thailand um
we're very close to China for the
reasons that we cited um I think they're
very good relation we don't have that
many conflicts with China compared to
many other countries we we you know
don't have an issue in the South China
Sea unlike other countries with China um
so yeah um we're a good friend to China
I think the relations are very good
between our countries we're also by
history by tradition by many many things
a very very uh close friend of the
United States yeah we are a major one of
the few uh one of not many I should say
um major that has a status of being
being a major non-nato US Ally right um
and and our relations go back you know
for for you know 19 years yeah yeah and
and I think the whole um uh you know
cooperation during the Vietnam war the
whole Cold War you know made our
particularly on the security front
between the US and Thailand there's this
element of trust and and and and uh
long-standing uh uh close so why I not
we taking enough advantage of both major
Powers superpowers yeah
the the one I would just add onto that
also is is it's not just with us and
China if you think about the other very
important play out there Japan Japan of
course yeah uh Japan uh for us uh again
Thailand is the country which has the
largest stock MH of FDI
investment from Japan in Asia outside
China yeah after China it's us yeah and
so you know Japanese have a very very
big wellestablished footprint here and
we have again very close relations with
ch with Japanese I think um uh you know
Tai's love to go to Japan you know this
is this is natural Affinity between
Thailand and I think and Japan um so
we're we we're so we're tied in uh uh uh
potentially to you know all the major
they all love us but we have not taken
enough Advantage exactly of the Affinity
yes that's the so what have we not done
right yeah in in this connection we
haven't made ourselves sufficiently
attractive to those production networks
um so for example I think I think one
thing uh that we've seen which is
unfortunate is we've seen uh over the
years that our market share for example
in attracting foreign direct investment
has dropped steadily over time yes uh we
know there are a lot of bright lights
out there that are very attractive you
know people are in love with the you
know the Indonesia vietn story you know
a lot of FDI going there there's not as
much coming into Thailand but again I
think um given that now there's probably
going to be a greater emphasis on
resiliency yes not just like efficiency
and trying to get the absolute lowest
cost but to a place that is you know
resilient that's safe that's stable
that's there sustainable yeah um those
things are important but but there are
things that we need to do to make
ourselves more attractive you mentioned
sustainable that's a perfect example one
thing that's very important for foreign
direct investors is to try to make sure
that their carbon footprint um is is is
limited and so energy is a very
important part of that so trying to make
sure that a a a sufficient percentage of
our our energy is is from uh renewable
sources is very important uh for uh
foreign investors to to come come come
to Thailand uh another aspect which I
think we've been lagging as well is in
uh signing uh uh and implementing
foreign tra a Free Trade Agreement yeah
um uh when when countries want to invest
obviously they want to be able to access
Third Country markets and other
countries in the region particularly
Vietnam has done a very good job on this
front uh We've tended to lag a bit so
there things like that that we need to
do uh another example uh uh is is trying
to liberalize our our um our Regulatory
and um legal regimes to make it more
business friendly more attractive to
foreign investors and Indonesia is a
good example I think of a country which
has done uh uh made made good progress
on that so these are again the kinds of
things that we need to do and there are
also examples that other countries uh
have done that I think we need to do in
order to actualize and realize those
opportunities that we I think we we have
the advantages that we have your
relations with the Prime Minister has
been in the headlines both locally and
internationally how do you describe your
relationships with prime minister seta
oh as I mentioned they're professional
and and cordial um cordal cordal yes
it's it's never a good thing I I think
when the central bank is is is on the
front page of the newspaper no no no
news is good news no news is good news
yeah so it's not something that we we so
what basically is the issue between you
and the Prime Minister oh I think it's
uh uh comes from the fact that uh we
have different roles to play and that we
wear different hats uh I think it's it's
a an issue that um we see um not just in
Thailand but I think in many countries
yes where there's this natural uh
tension I I called it a creative tension
creative creative tension you don't
enjoy it but it's creative creative it's
there uh between the government and the
uh and the central bank I mean the
government obviously is tends to favor
growth the central bank by nature of its
mandate uh it it tends to to put a
significant weight on stability yes uh
governments tend to be shorter term and
orientation the central bank again tends
to look at longer term issues and then
and then by Nature we need to look at um
uh things in a much more holistic
fashion take into account uh unintended
consequences of of different measures so
I think that leads to that difference of
um of of of of of of opinion and and
that creative tension that we describes
your relationship with him as having
mutual respect I think that that says a
lot about the official relationship yeah
but your staff Central Bank and uh
NDB the National Economic planning
agency and the finance
Ministries uh what is the
agency that they have the fiscal policy
office fiscal polic your staff and their
staff work together oh absolutely very
very closely uh uh we're share
communication yes we're in Comm uh we're
in contact uh uh regularly and I have to
say that um um when because we're we're
operating pretty much off the same set
of data yes um our our views and Outlook
are are broadly in line um I know
there's been again in the press and
whatnot some some uh
have written about how the the forecast
and what the outlooks are not are not
aligned right U but I I would argue and
I would like to try to point out that a
lot of times these differences in terms
of for for example the Outlook and the
forecast that the different agencies
have they they occur because they occur
at different times so you know if if
someone has a say they did their
forecast you know X months ago yes um
that forecast might be on the high side
because things have turned out a bit
softer than we had expected right and
those that did the forecast more
recently those will tend to be a bit
lower so if you compare those two
different forecasts because they're at
different points in time the forecasts
look quite different but if you if you
look now for example we're you know
pretty much operating at the with the
same data set and at the same time uh I
think that the the forecast for this
year for the key agencies us the nesdb
and the um uh the Ministry of Finance
broadly in line like I said we haven't
put out our official forecast yet but
our interim guidance 2.5 to 3% for this
year is again broadly in line with what
the nesdb put out and also with what the
what the Ministry of Finance put out for
this year as well you're under great
pressure from the government to reduce
interest rates how do you react to that
it's part of the job to be under
pressure yeah how do you explain to the
government oh I I would say the
politicians that you have your you know
role to play and they have their own
role to play but they seem to think that
you are not being realistic yeah that
you do not understand the common
people's problems yeah you people are up
there in the Ivory Tower right right
right so are you up
there I I think again it comes that
difference comes from the fact that
we're wearing different hats and we have
that different emphasis um the
short-term versus long-term right uh
looking at growth versus stability and
you know how do you weigh those things
uh that's what's accounting for the the
the difference in in in opinion
regarding the policies but again uh in
terms of explain explaining uh our our
policy stance and and our policy
decisions which again I would like to
emphasize are the policy decisions of
the monetary policy committee yeah not
just me or the bank of Thailand because
the monetary policy Committee in
Thailand which is fairly unique actually
it's not the same as with other
countries we have seven people we have
seven people on the monitary policy
committee what's different in Thailand
uh compared to a lot of other countries
a lot of other central banks is there
are more outside members
on the committee than they are internal
Bank of Thailand people is that the rule
no it's by law by in in Thailand four
against three yeah exactly there they
three internal people uh me and then two
Deputy Governors and then the other four
are from outside who chooses who Choose
The Outsiders um the our board the bank
of Thailand board chooses who uh the the
composition of the of the monetary
policy committee um based on on
recommendations from from from from us
from the bank of Thailand but um uh
which is quite different from a lot of
other countries where they're more in
internal people than outside people so
again I want to emphasize that the the
decisions that are taken are are uh from
the uh monetary policy committee not
just from the from the bank of Thailand
or at the behest of the of the governor
I I cannot in prati in principle or in
practice dictate what the interest rate
will be so any decision has to be from
the committee not oh absolutely I say
yeah yeah yeah yeah yeah like I said
it's certainly not a unilateral decision
so you don't think lowering the
insurance rates has anything to do with
the trying to boost the economy to
stimulate the economy as the government
has suggested they are suggesting that
if you cut interest rates it would
stimulate the economy but you saying
that it may not be that direct the
relationship um no what we're saying is
it has to be balanced with a lot of
different things um our our our the
framework that we have for for making
interest rate decisions is what we call
our flexible inflation targeting
framework we look at three things um uh
primarily when deciding that we look at
growth obviously and growth we we we
would like to see growth be close to
what we feel as our long-term uh uh
sustainable rate of growth which based
upon our latest estimates and whatnot is
ballpark about 3%
real GDP growth uh we look at inflation
and for that we expect we would like
headline inflation to be within our
target range which is 1 to 3% headline
and then we also very importantly need
to look at Financial stability so when
we decide what to do with grates we
can't just look at just any
one variable like GDP growth and and
focus just on that we need to take a
look at the totality uh take all these
things into consideration so getting
back to your question um uh would
lowering rate
tend to have a stimulative impact on the
economy uh the short answer is yes it
would tend to have a stimulative impact
on the economy but one that has to be
balanced with the other considerations
that we have on the table notably things
like Financial stability because the
other thing that we have that is of
quite High concern for us we have very
very high level of household debt
household debt is like 90 plus perc of
GDP um that does not bode well for
long-term Financial stability we would
like to see that get back on a more
sustainable path and uh part of the
reason that that debt has gone up to
that level uh so rapidly in the past uh
has to do in part uh either in large or
small part uh uh to the fact that rates
in Thailand have been low for so long
yeah so um that's first point that that
we have to balance it with the other uh
considerations uh things like on the um
uh Financial stability front the second
point also is the stimulative impact
getting back to more directly to the
question mean not be that large why
because if you look at the reason that
growth has tended to underperform it it
has to do with factors like our exports
are not doing as well as as we had
expected and that has a lot to do with
structural factors I think yes that
China is not importing a lot of the
stuff that we're exporting particularly
on things like petrochemicals and
chemicals it has to do with the fact
that tourists aren't spending as much as
we had expected right uh which doesn't
have a lot to do with interest rates it
has to do with the fact that uh
government dispersement has been a bit
below expectation
does much to do with interest rates so
if you look at the reasons that growth
is underperformed it doesn't have that
much to do with interest rates interest
rates would help perhaps offset some of
that slow of growth from boosting
consumption uh and possibly investment
at the margin but if you look at
consumption consumption has been growing
at a rapid rapid clip um you know last
year consumption grew basically at
record levels so the additional boost
that you would get from consumption
probably from low rates is probably not
that much and also probably not that
desirable if it comes at the expense of
increasing household debt which is not
something that we would like to see so
it's it's again you know taking that
totality of of of of factors into
account and take into account some of
the longer term implications that uh uh
caused the majority of the NPC members
to decide to keep rates at at where they
were at
2.5% which in the Press is usually
referred to as decade High interest
rates
yeah but I would also point out which
while that is true it is also true that
is it is also among the lowest in the
world there are two countries out there
that have uh uh interest rates policy
rates uh that are lower than ours which
is Japan and Switzerland uhhuh all the
other countries have policy rates that
are higher good company yeah I I don't
know but the point is that you know
compared to other countries it's not you
know alarmingly high it's certainly not
the level that we see in other countries
but again I'm not saying that that's the
main factor in deciding what to do with
rates we will look first and foremost at
domestic factors but um but they always
like to point out in the Press decade
High yes decade high but also it is true
but but yeah the other side is also true
yeah thank you very much Governor thank
you
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