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BANGKOK (Reuters) -Monetary policy cannot fix structural problems holding back Thailand’s economy, the central bank said on Wednesday, as the government is pressing for a rate cut to help revive flagging growth.
Southeast Asia’s second-largest economy slowed down in December and the fourth quarter as tourist spending and exports softened due to subdued global demand and structural restraints, which negatively affected manufacturing production and private investment, the Bank of Thailand (BOT) said.
“Monetary policy can’t directly address structural problems,” senior BOT director Sakkapop Panyanukul told a briefing, echoing the central bank’s earlier statements.
Instead, Thailand needs to boost productivity, the share of advanced technology in its exports, and the attractiveness of its tourism offer, the central bank has said.
The government has raised pressure on the BOT to cut its policy rate, which is at a decade-high of 2.50%, at its next meeting on Feb. 7 to help lower borrowing costs and spur growth.
Last week, central bank Governor Sethaput Suthiwartnarueput told Reuters that the current rate was ‘broadly neutral’.
The BOT left its main rate unchanged at its last policy meeting in November, having raised it by 200 basis points since August 2022 to curb inflation.
In December, exports, a key driver of Thai growth, rose 3% from a year earlier after November’s 3.9% rise.
Private consumption rose 0.1% from November and private investment dropped 2.4%, the BOT said, noting economic activity would be supported in January by consumption and tourism.
Thailand’s economy grew by 1.5% in the July-September quarter of 2023 from a year earlier, less than expected, on weak exports and government spending.
Governor Sethaput told Reuters he expected a similar growth rate for the fourth quarter, with the full-year expansion seen below a previous forecast of 2.4%. Official gross domestic product figures are due on Feb. 19.
He said 2024 growth could be below 3%, less than earlier forecast, but the economy was not in crisis as portrayed by the government.
The finance ministry has slashed its 2023 growth forecast to 1.8% from 2.7% seen earlier and its 2024 growth outlook to 2.8% from 3.2%.
Prime Minister Srettha Thavisin – a real estate mogul and political newcomer – has repeatedly said the economy is in crisis and needs a big boost.
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