Bank of Thailand boss clashes with the government, saying current economic policies only benefit big businesses while household debt soars. He warns against GDP obsession and calls for localised economic planning focused on well-being over growth.
Thailand’s central bank boss continues to be at odds with the Pheu Thai-led government. Again this week, he has been openly criticised by a senior cabinet minister. Undoubtedly, there is now a widening difference of thinking between Sethaput Suthiwartnarueput and his political colleagues on how the Thai economy should be managed. Mr. Sethaput’s disillusionment with the current government’s model for economic growth was on full display recently in a speech he gave to an audience in Bangkok. The central bank boss noted that while the Thai economy grew by nearly 30% in ten years, in a similar period, Thai household debt has mushroomed. Furthermore, he warned that the major beneficiaries of government policy appear to be the kingdom’s large corporations.
Thailand’s embattled central bank chief, presently facing ominous signals from the new government of Prime Minister Paetongtarn Shinawatra, has spoken strongly about how economic thinking in the country must change.
Sethaput Suthiwartnarueput, the 59-year-old 24th governor of the Bank of Thailand, won praise this year for standing up to pressure to adjust the country’s interest rate policy.
In short, he was sharply criticised by ministers in the government for refusing to lower interest rates. Mr. Sethaput repeatedly argued that the rate was neutral. He warned that reducing it for a short-term impact would only leave the country open to unintended consequences.
Central Bank chief speaks on Thailand’s economic future, addressing the need for changes in growth strategies
However, speaking recently at a forum, the banker expounded on his views. Undeniably, they appear to be at odds with the Shinawatra-led government.
In summary, the central bank boss believes Thailand’s fixation with GDP growth must be reassessed. He was speaking on the theme “Building a Strong Thailand with Localism: The Future of Thailand.”
Mr. Sethaput said boosting GDP and seeking further foreign direct investment was no longer the recipe for success. In short, it was not what the kingdom needed.
In particular, he raised the issue of unsustainable growth in Thai household debt. For instance, in the last ten years, Thailand’s GDP grew from $407.3 billion to a projected figure of $528 billion in 2024, assuming a growth rate of 2.5% this year. Last year, Thailand’s GDP was $514.94 billion. This represents a growth rate of 29.63%.
Growth in Thailand’s GDP doesn’t align with rising household debt, highlighting income stagnation or worse
Nonetheless, household income does not appear to have grown. Certainly, household debt has, and substantially so. The central bank boss quoted University of the Thai Chamber of Commerce (UTCC) figures.
These were released on September 13. In short, they show that from 2009 to 2024, Thai household debt has ballooned by 322%. In particular, the average household debt in 2009 was ฿143,000. At this time, the figure is ฿606,378.
Meanwhile, the central bank boss noted that in the business sector, it was large companies that had grown. The top 5% of firms saw income grow by 80-90% in the ten-year period.
At the same time, small firms or enterprises less than five years old are presently closing faster. The rate of closure has gone up, certainly reflecting a concentration of commercial power at the top.
Thirdly, the central bank boss pointed to a changed world since 2014. He warned that Thailand could no longer rely on foreign direct investment as an economic panacea.
Thailand’s foreign investment landscape has shifted It lost ground to Indonesia and Vietnam in recent years
From 2001 to 2005, the kingdom’s worldwide market share of such investment was 0.57%. Undoubtedly, these were the heyday of the Thaksin era. Thailand was doing significantly better than its peers.
The governor emphasised that Thailand has since lost out to both Indonesia and Vietnam.
“Thailand is no longer as attractive as before,” he told his audience. The reasons are varied, from educational standards to demographics. In addition, the kingdom is still seen as politically unstable, and certainly unpredictable.
However, Mr. Sethaput was clear that this race is no longer appropriate for Thailand. “We should not grow by chasing GDP or FDI figures anymore. We have to see how much GDP or FDI benefits the country’s well-being. Because the figures that need to be hunted are household income and wealth that reflect people’s well-being, such as public health and education. The past figures did not reflect people’s well-being. Therefore, we have to rely on strength from within the country,” he argued.
Central Bank Governor urges for new localised economic thinking to address Thailand’s deeper issues
Therefore, the central bank boss called for new thinking. He proposed a more localised approach to economic planning. In his speech, he underlined that 80% of Thailand’s population and business concerns are outside the Bangkok Metropolitan Area.
The Bank of Thailand governor, whose term expires in September 2025, said it will not be easy. Not only does Thailand require localised powerhouses, but such enterprises must be effective and efficient by world standards.
They must be able to offer value at a competitive price. The central banker pointed to small operators using the internet and finding collaborators both at home and abroad to create a new economy from the bottom up.
Commerce Minister criticises central bank policies amid growing calls for interest rate adjustments
It comes as the governor and his executives were the subject of a scathing attack on Monday from Minister of Commerce Pichai Naripthaphan. Mr. Pichai insists that the bank’s Monetary Policy Committee must lower interest rates.
Commerce Minister Pichai tears into the Bank of Thailand as the baht strengthens against the US dollar
Sea change in US markets sees baht rise sharply. Ailing Thai economy still ekes out tepid growth of 2.5-2.6%
Certainly, his call will be more powerful following the anticipated Federal Reserve decision to lower rates in the United States. Indeed, Mr. Pichai questioned Mr. Sethaput’s thinking process and, furthermore, the education of those at the central bank.
In truth, there is certainly a difference in thinking emerging. Undeniably, Thailand needs new answers, as the policies of the past two decades have failed.
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Further reading:
Central bank holds interest rates. Economy will grow 2.6% in 2024 as Srettha pushes home ownership
Economy unlikely to grow in first quarter as Thai manufacturing crumbles. Hard choices ahead
New Finance Minister expected in April as economic malaise deepens with downgrades in GDP growth
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