Thai Prime Minister Urges Banks to Lower Interest Rates to Support Economy

Thai Prime Minister Srettha Thavisin has asked the country's four largest banks - Bangkok Bank, Kasikornbank, Krungthaibank, and SCBX - to lower interest rates to support small and medium-sized enterprises (SMEs) and the overall economy. In a meeting with the bank CEOs, Srettha stated that vulnerable groups like SMEs are facing problems due to high interest rates, and he has requested the banks to consider lowering the rates.

The Prime Minister's move comes as the Bank of Thailand (BOT) has held interest rates at a decade-high, ignoring calls for rate cuts. Most state-owned banks have held loan rates steady even as the BOT lifted borrowing costs by 200 basis points during a tightening cycle. The government is seeking to stimulate the economy by lowering borrowing costs, even as the central bank maintains its tight monetary policy stance.

Why this matters: The Prime Minister's request highlights the growing tension between the government and the central bank over monetary policy. It also emphasizes the challenges faced by small businesses and the broader economy due to high borrowing costs.

Srettha noted that Thai financial institutions are strong and can afford to provide this support to the economy. The sluggish growth outlook and government-central bank tensions have rattled foreign investors, leading to over $3 billion in bond and stock outflows this year. The BOT expects economic growth to accelerate to 2.6% in 2024, with the administration set to begin a 500-billion-baht digital wallet stimulus program in the fourth quarter.

The Prime Minister's request to the banks is aimed at providing relief to businesses and consumers struggling with high borrowing costs amidst the economic challenges faced by Thailand. The response of the banks to the Prime Minister's call and potential adjustments to the central bank's monetary policy stance in the coming months remain uncertain.

Key Takeaways

• Thai PM asks banks to lower interest rates to support SMEs and economy.
• Banks have held loan rates steady despite central bank's 200 bps rate hikes.
• Tension between govt and central bank over monetary policy to stimulate economy.
• Sluggish growth, govt-central bank tensions lead to $3B in bond, stock outflows.
• Govt to launch 500B-baht digital wallet stimulus program in Q4 2023.