Thai baht is too strong and is impacting exports, says minister By Reuters

BANGKOK (Reuters) – Thailand’s baht is too strong and is hurting exports, which are expected to see only modest growth this year, and the central bank should take action on the currency, the trade minister said on Monday.

The Bank of Thailand (BOT) should also cut interest rates to boost liquidity, Pichai Naripthaphan said, continuing a months-long disagreement between the government and the central bank over rate-setting.

On Monday, the baht traded at its strongest level in 18 months against the US dollar.

The ministry last month kept its full-year export growth target at 1 percent to 2 percent. For the January-July period, exports increased by 3.8% compared to the same period in 2023.

In August, the central bank kept key rates at 2.50 percent for the 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 October 16.

Prime Minister Paetongtarn Shinawatra said earlier this year, before becoming 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 planned fiscal stimulus as it aims to jump-start Southeast Asia’s second-largest economy.

The government will launch the first phase of its “digital wallet” program later this month, when it will distribute 145 billion baht ($4.4 billion) to vulnerable groups. The entire 450 billion baht stimulus measure aims to give 10,000 baht to 50 million Thais to be spent in local communities.

The scheme has been criticized by economists, including two former central bank governors, as fiscally irresponsible. The government denies this, but has struggled to find sources of funding.

He insists the policy is needed to boost the economy, which the central bank expects to grow by just 2.6 percent this year, compared to 1.9 percent in 2023 and far behind most regional partners.

However, growth was below potential due to structural problems, central bank governor Sethaput Suthiwartnarueput said.

(1 USD = 33.1600 baht)