Thailand’s central bank chief on its rate cuts, household debt and fintech
The important thing is not just political stability, but also administrative stability, says Bank of Thailand governor Sethaput Suthiwartnarueput
Published Tue, Dec 31, 2024 · 08:51 AM
AS THAILAND works to accelerate its post-pandemic economic recovery, its central bank is playing a key role.
While a rebound in tourism, a key growth driver, has kindled optimism, South-east Asia’s second-largest economy is still grappling with long-standing issues such as climbing household debt, making interest rate policy a core issue.
In October, the Bank of Thailand (BOT) cut its policy rate, surprising the market. This renewed debate about the country’s monetary policy amid growing global uncertainty, such as the potential impact of Donald Trump’s return to office as US president in January.
While preparing for the unknown, the central bank is also on a mission to innovate the Thai banking sector, such as driving the greater adoption of digital payments and using the sector to facilitate the transition to greener growth.
These issues were raised during Caixin’s interview with BOT governor Sethaput Suthiwartnarueput at the central bank’s headquarters in Bangkok.
Sethaput possesses extensive experience in economics, policy and financial markets. He previously held senior positions at several domestic institutions, including the Stock Exchange of Thailand and the Ministry of Finance. The 59-year-old veteran central banker also had stints working with the World Bank in Washington and McKinsey & Co in New York. He has a PhD in economics from Yale University.
The BOT’s October interest rate cut came as a surprise to some. What’s the rationale behind it?
First, I have to say that we were a bit surprised at how surprised the market was because we had laid out the scenario.
Basically, when we look at setting rates, we look at three things: the growth outlook, the inflation outlook and financial stability. For us, growth and inflation are pretty much on target. But the thing that we have always raised as a concern was financial stability.
Obviously, we have issues around high household debt. When you lower rates, it has two effects: It lowers the burden of the existing debt, but it also encourages new borrowing. So, one issue that we are always trying to balance is what impact interest rates will have on the overall debt trajectory.
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