Chairman of the Thailand Development Research Institute (TDRI), Dr. Somkiat Tangkitvanich, has advised the government not to interfere with the Bank of Thailand over the policy interest rate, warning that it may seriously impact the economy, to the extent that the government may not survive.
Speaking at the Prachachat business forum earlier this week, Somkiat cited the case of Turkey, where the government became embroiled in a conflict with the central bank over the government’s desire to cut interest rates, leading to the sacking of three board members of the bank. In the end, however, the interest cut resulted to an 80% spike in inflation in the country.
He also cited another a lesson learned in the United Kingdom, when then Prime Minister Liz Truss, who was only in office in September and October 2022, defied the central bank’s advice by ordering a cut in taxes. In the end, the economy of the country suffered and the prime minister had to step down.
Dr. Somkiat asked Prime Minister Srettha Thavisin to tell his aides to stop attacking the central bank over its refusal to cut the policy rate, noting that both the government and the central bank have their own duties and responsibilities.
Regarding the controversial “digital wallet” scheme, under which every Thai, aged 16 and above, will receive a benefit of 10,000 baht to stimulate consumption, the TDRI chairman said that this is not the first time that the government has introduced a taxpayer funded benefit to boost the sluggish economy, as the previous administrations of M.R. Kukrit Pramoj, Thaksin Shinawatra and Prayut Chan-o-cha had done.
Thailand is not the only country to engage in giving cash to its citizens to boost the economy, said Somkiat.
He also dismissed the claim that the digital wallet scheme would result in a sizeable economic multiplying effect, citing similar programs in the past which only had a minimal positive effect of up to 0.5% percent.
The government must adhere to fiscal discipline, as cash benefits to the people may lead to an increase in public borrowing and the lowering of Thailand’s and the private sector’s credit ratings, claimed Somkiat.
