By BANGKOK (Reuters) – Thailand’s baht is too strong and is affecting exports, which are expected to post only small growth this year, and the central bank should take action on the currency, the commerce minister said on Monday.
The Bank of Thailand (BOT) should also cut interest rates to increase liquidity, Pichai Naripthaphan said, continuing a months-long disagreement between the government and the central bank over the setting of rates.
One Monday, the baht traded at its strongest level in more than 18 months against the U.S. dollar.
The ministry last month maintained its export growth target for the full year at 1% to 2%. For the January-July period, exports were up 3.8% from the same period in 2023.
In August, the central bank held key rates at 2.50% for a fifth straight meeting, saying policy settings were at neutral levels as it resisted the government’s call for a rate cut.
The next rate review is on Oct. 16.
Prime Minister Paetongtarn Shinawatra said earlier this year, before she became prime minister, that central bank independence was an obstacle to solving economic problems.
The government, led by the populist Pheu Thai party, has repeatedly called for a rate cut to align with its planned fiscal stimulus as it looks to jump start Southeast Asia’s second-largest economy.
The government will launch the first phase of its signature “digital wallet” programme later this month when it distributes 145 billion baht ($4.4 billion) to vulnerable groups. The entire 450 billion baht stimulus measure aims to give 10,000 baht each to 50 million Thais to be spent in their local communities.
The scheme has been criticised by economists, including two former central bank governors, as fiscally irresponsible. The government rejects that, but has struggled to find sources of funding.
It insists the policy is necessary to energise the economy, which the central bank expects to grow just 2.6% this year, up from 1.9% in 2023 and far adrift of most regional peers.
Growth was below potential, however, because of structural problems, central bank Governor Sethaput Suthiwartnarueput has said.
($1 = 33.1600 baht)