Macroeconomics

Chatrudee Theparat

It’s a proper time to reduce policy rate

NESDC has signaled to related agencies to reduce the policy rate, net interest margin and others to survive households and small and medium enterprises which are being in trouble from household debts.

The National Economic and Social Development Council (NESDC) Secretary general Danucha Pichayanan said it is an appropriate time for related agencies to use the monetary policy as a tool to boost economy because the government has already implemented all fiscal policies after the economic growth in 2023 grew by 1.9%. The monetary policy includes the policy rate reduction, net interest margin, deposit rate and lending rate.

“The reduction of the policy rate, net interest margin, deposit rate and lending rate should be focused to assist households and small and medium enterprises (SMEs) because they are likely to suffer from additional non-performing loans.”

Danucha Pichayanan

He said the gap between deposit rate and lending rate for households and SMEs should be narrowed, as well as the relaxed policy to credit card holders with a minimum payment to 5% from current 8% because most SMEs to use money from credit cards as revolving fund in their businesses. The minimum payment 5% of credit cards had been in place and expired on December 2023.

Mr Danucha declined to say a specific detail of the policy rate reduction, but said it was a role of the Bank of Thailand (BoT). However, the rapid movement of BoT would help reduce household debt and burden among SMEs.

The agency announced the Thai economy in the fourth quarter of 2023 expanded by only 1.7 %, up from 1.4 % in the previous quarter. After seasonally adjusted, the economy decreased by 0.6 % from the third quarter.

The Thai economy in 2023 grew by 1.9 %, down from 2.5 % in 2022. GDP per capita was 255,867.7 baht per person per annum (7,331.5 US dollars per person per annum), up from 248,788.6 baht per person per annum (7,094.1 US dollars per person per annum) in 2022.

The Thai economy in 2024 is projected to expand in the range of 2.2 – 3.2 % (with the midpoint of 2.7 %), down from previous projection on November 20, 2023 of the range 2.7-3.7% because downward revision of private consumption from the previous estimation due to expected lower income base from exports and industrial production.

Public investment declined by 1.8 % due to a delay in the 2024 fiscal budget.

Export value of goods in US dollar term is projected to rebound to 2.9%, compared with a 1.7 % in 2023. However a downward revision from a 3.8 % growth in the previous estimation. For government consumption expenditure, it is projected to expand by 1.5 %, compared with 4.6% in 2023, and a downward revision from a 2.2 % growth in the previous estimation.

Total investment is expected to increase by 2.5 %, up from 1.2 % in 2023, while private investment is estimated to increase by 3.5 % from 3.2 % in 2023.

The agency suggested economic management for the year 2024 should be prioritized on monitoring, examination and scrutiny of market dumping measures, as well as the utilization of unfair trade practices by major exporting countries; enhancing production potential and bolstering the capacity of domestic entrepreneurs especially SMEs, boosting the export of high-potential products that are experiencing growing demand in the global market, encouraging entrepreneurs who already got approved and obtained investment promotion certificates in 2021 - 2023 to start their actual investments as soon as possible;

Organizing domestic tourism promotion events by creating a travel promotion calendar throughout the year, the launch of measures to strengthen farmers' resilience through promoting and developing an efficient crop insurance scheme to cushion the climate risks should be under its focus.

Maintaining the growth momentum from public expenditure and investment with the project achievement and monitoring for the 2024 fiscal budget should be disbursed at least not less than 90.4 % of the total budget, consisting of current budget of 97.0 %, and investment budget of 65%.