On Monday, speaking at a forum in Bangkok, Governor Sethaput Suthiwartnarueput of the Bank of Thailand highlighted the kingdom’s sky-high household debt level which he told his audience stood at 88% of GDP at the end of June or approximately ฿15 trillion. The bank had been planning two further rate hikes of 25 basis points this year, one on Wednesday and the other at the end of November but the pressure is mounting for a heftier rate rise to prop up the falling baht as the gap between interest rates in the United States and Thailand has widened substantially in the last few months.
All eyes will be on the Bank of Thailand’s Monetary Policy Committee meeting on Wednesday when it will be under pressure to go beyond a 25 basis points rise in the borrowing rate which currently stands at 0.75%. Inflation of 7.86% in August and the plummeting baht will make a strong case for a heftier rise but the impact of higher borrowing costs on ฿15 trillion in household debt recorded at the end of June gives us some idea of how this may impact what Bank of Thailand Governor Sethaput Suthiwartnarueput has described as a fragile and uneven economic recovery with the country trying desperately to move beyond the disaster inflicted on the economy in 2020.
Pressure is building on the Bank of Thailand as it seeks to maintain its benign interest rate policy as the baht tumbled again on Monday with US interest rates at between 3% and 3.25% and Thailand’s at 0.75%. This comes as Thailand reported a $4.2 billion trade deficit in August and with the country’s vast foreign exchange reserves falling by 5.4% from mid-August up to last Friday. On Monday, days ahead of the Monetary Policy Committee of the central bank, Governor Sethaput Suthiwartnarueput told a forum that he was concerned about the kingdom’s massive ฿15 trillion in household debt which he described as a structural impediment to GDP growth.
As the baht tumbled again on Monday, at one point, hitting ฿37.90 against the dollar before falling back to ฿37.82, it had fallen by as much as 17.59% since the 13th of February when it was quoted at ฿32.16 to the greenback.
Source: Thai Examiner