- Cambodian microfinance lending on the back of rising land prices points to a further increase in NPLs
- Can Pfizer Stock Help You Become a Millionaire?
- German authorities were left cold by UniCredit’s attack on Commerzbank
- Why MicroStrategy shares fell 11% on Thursday
- A new trade war? Escalating friction in relations between Indonesia and the EU
- Exclusive-US has ordered TSMC to halt shipments to China of chips used in AI applications, source says
More than 800 leading Thai economists, including four former central bank governors, have warned against political interference in the selection of the next chairman of the Bank of Thailand (BOT).
In a statement Saturday, the group of economists said, which refer to themselves as the group “Economists for Society” said the government’s appointment of former Finance Minister Kittirat Na Ranong, a loyalist of the ruling Pheu Thai Party who has been publicly critical of BOT Governor Sethaput Suthiwartnarueput, undermined “credibility” of the institution as an impartial economic arbiter.
The statement follows months of disagreements over monetary policy between the BOT and the Pheu Thai-led government, now led by Prime Minister Paetongtarn Shinawatra. The government wants to shake the Thai economy out of its current stupor and has pushed the BOT to cut interest rates and raise the inflation target, a demand the central bank has refused to agree to. Sethaput has also expressed his opposition to the Pheu Thai government’s incentive policy for “digital wallets”.
The Economists for Society group pointed to the fact that Kittirat has held multiple political posts under Pheu Thai-led governments, which it said posed a potential threat to the perception of the BOT’s independence. Should the BOT “carry out the wishes of the political grouping, it would damage the credibility of the central bank, which must maintain strong economic stability for the country in the long term,” the economists said in the statement, Reuters. reported.
Kittirat previously served as deputy leader and chief economic strategist for Pheu Thai, according to the Bangkok Post. He also acted as an advisor to former Prime Minister Srettha Thavisin and publicly criticized the BOT’s position on monetary policy.
News of Kittirat’s appointment first leaked last week, prompting expressions of concern among Thai economists and forcing the government postpone a meeting where the new BOT chairman will be elected. The meeting will now take place today.
The group of economists said it was not against Kittirat’s appointment per se, but was campaigning on the principle that anyone with close ties to politicians in power should not serve as chairman of the BOT board.
In a recent speech at the annual conference of the Bank of International Settlements in Switzerland, BOT Governor Sethaput said concerns expressed on the increasing challenges to central bank independence from central banks around the world. “If we allow central bank independence to be eroded, we will not be able to deliver on our core mandates,” the governor said.
Shortly after Pheu Thai took office in September 2023, the BOT raised the benchmark interest rate to a ten-year high of 2.5 percent. Despite repeated calls from the government to ease monetary policy, interest rates remained unchanged until last month, when the central bank unexpectedly announced a 25 basis point cut, the first since 2020. Given the pressure from above, it has since been forced to argue that the move was a “recalibration” and not the result of political pressure.
For its part, the Thai government insists it respects the BOT’s independence but wants it to do more to help revive the economy, which has been sluggish since the end of the COVID-19 pandemic. As James Guild wrote in these pages in May, the Pheu Thai government has a number of reasons for a return to the low interest rates that have characterized the Thai economy for years.
The first is that it prevents the baht from becoming stronger, which could potentially undermine the baht’s competitive position Thai exportsincluding tourism. The second reason is the country’s high consumer debt, which has been exacerbated by higher interest rates and could potentially translate into political problems for the Pheu Thai government.
The BOT, meanwhile, is forced to walk a fine line in managing Thailand’s economy. “If the baht is too strong, it will make Thailand less attractive as a tourist destination or export hub,” Guild wrote. “But if the baht loses too much value too quickly, it could lead to capital flight that devalues the currency and destabilizes the economy.”