Thai Central Bank Sees Credit, Not Rates, Key Amid Rocky Rebound

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The Bank of Thailand sees access to credit for businesses as a more pressing issue for the economy than interest-rate levels, and will stay focused on domestic concerns amid possible normalization by other central banks.

“In terms of the speed and pace of re-normalization, those will have to respond to Thailand-specific considerations” more than what other countries are doing, Governor Sethaput Suthiwartnarueput said Thursday in a Bloomberg TV interview with Haslinda Amin.

“The issue in Thailand has been more in terms of access to liquidity,” particularly for small- and medium-sized businesses, rather than the level of policy rates, he said, adding that the bank is focused on easing those concerns.

Thailand is grappling with its third, and biggest, wave of Covid-19 cases and a delayed reopening for its tourism industry, as well as renewed political tensions as anti-government protesters hit the streets again after a six-month lull.

Prime Minister Prayuth Chan-Ocha’s government plans to fully reopen Thailand’s borders in October, a calculated risk to boost Southeast Asia’s second-biggest economy, which has seen its prospects downgraded amid the resurgence of Covid cases.

The central bank on Wednesday lowered its gross domestic product forecast for this year to 1.8% growth, from 3% earlier, amid an outlook for fewer tourist arrivals and weak domestic consumption.

“Our recovery will be slow and uneven,” Sethaput said in Thursday’s interview, with manufacturing “largely OK” while services have been hit very hard. The rebound in tourism, which employs about one-fifth of Thailand’s labor market directly or indirectly, will lag the pace of the global economic recovery, he said.

That means that even when Thailand reaches pre-Covid levels of growth -- perhaps as early as the end of 2022 -- “things are not going to feel like they’re back to normal,” Sethaput told Bloomberg. It could take four or five years for Thailand to see 40 million annual tourist arrivals, a level it approached just before the pandemic, he said.

Sethaput sees the global economic recovery remaining intact, with advanced economies leading the way. “If anything, the U.S. economy is likely to surprise on the upside,” he said.

Thai policy makers kept benchmark interest rates unchanged at a record low Wednesday, preserving their remaining policy space while promoting debt restructuring as a more helpful tool for struggling businesses and households. The central bank earlier this month extended a limited debt moratorium until year-end to help small and medium-sized enterprises.

Other points from Thursday’s interview with Sethaput include:

• While the bank’s 1.8% GDP growth forecast for this year faces uncertainties from the Covid-19 outbreak and return of foreign tourist arrivals, the economy is unlikely to contract again because of recovering exports and a comparison with last year’s low base
• The bank isn’t targeting a specific level for the baht, but would like to see the currency reflect fundamentals rather than speculative activity
• Quantitative easing isn’t currently under consideration as liquidity isn’t an issue in Thailand, and QE wouldn’t address problems with access to credit

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