Analysis-‘No Excuses’: Thai Central Bank Rate Cut Intensifies Pressure on PM to Spur Economy

FILE PHOTO: A bank employee gathers Thai baht notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023. REUTERS/Athit Perawongmetha/File Photo

By Orathai Sriring

BANGKOK (Reuters) – After months of withstanding political pressure and public bickering, Thailand’s central bank on Wednesday delivered what the country’s government had been pressing for: it cut its key interest rate, the first reduction since 2020.

Now comes the hard part for Prime Minister Paetongtarn Shinawatra, an untested leader whose ruling Pheu Thai party has struggled to fire up the economy since it took office last year and placed its bets on a major cash handout programme.

Having lost the BOT as a whipping boy, it is up to Paetongtarn’s government to deliver the goods – but the odds appear stacked against it.

“Of course, this time there are no excuses. The government must continue to stimulate the economy fully,” said Natapon Khamthakrue, an analyst at Yuanta Securities.

Bogged down by massive household debt, lacklustre consumer spending and plummeting industrial sentiment, Southeast Asia’s second-largest economy faces an extended period of headwinds after growing 2.3% year-on-year in the second quarter, analysts said.

“The slowdown in economic growth is far from over,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, forecasting a slide in GDP growth to just 2% next year.

The Bank of Thailand (BOT) itself cut its 2025 GDP growth projection to 2.9% from its earlier forecast of 3%, although the economy was expected to grow 2.7% this year, higher than the 2.6% it had previously forecast but lagging its Asian peers.

The central bank also emphasised that Wednesday’s 25-basis-point rate cut wasn’t the start of an easing cycle, describing it as a “recalibration” that was not triggered by political pressure.