Sethaput Suthiwartnarueput - Bank of Thailand Governor | Thai PBS World Exclusive

Summary

The 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.