Dr. Somkiat Tangkitvanich, the Chairman of the Thailand Development Research Institute (TDRI), has cautioned the government against intervening with the Bank of Thailand on the policy interest rate. He cautioned that such interference could have a serious impact on the economy, to the extent that the government may not survive.
During the Prachachat business forum earlier this week, Somkiat mentioned the situation in Turkey, where the government clashed with the central bank over its desire to reduce interest rates, resulting in the removal of three bank board members. However, the interest rate cut led to an 80% increase in inflation in the country.
He also referenced a lesson from the United Kingdom, when Prime Minister Liz Truss, who was in office for only a short time, went against the central bank’s advice by cutting taxes. This decision negatively impacted the country's economy, leading to the prime minister's resignation.
Dr. Somkiat urged Prime Minister Srettha Thavisin to instruct his staff to halt their criticism of the central bank for refusing to lower the policy rate, emphasizing that both the government and the central bank have their own responsibilities.
Dr. Somkiat, the TDRI chairman, remarked that the government has previously introduced taxpayer-funded benefits to stimulate the sluggish economy, referring to the administrations of M.R. Kukrit Pramoj, Thaksin Shinawatra, and Prayut Chan-o-cha.
Somkiat stated that Thailand is not the only country engaging in providing cash to its citizens to bolster the economy.
He also rejected the idea that the digital wallet scheme would have a significant economic multiplier effect, pointing to previous programs that only had a minimal positive impact of up to 0.5%.
According to Somkiat, the government must maintain fiscal discipline, as offering cash benefits to the people could increase public borrowing and lower Thailand's and the private sector's credit ratings.
