Thai Central Bank Leader Warns About Potential Financial Instability in Government Spending
In a recent address, Sethaput Suthiwartnarueput, the Governor of the Bank of Thailand, has highlighted the need for government support mechanisms to address structural issues facing the Thai economy. Suthiwartnarueput, who has been in office since 2020, has proposed a balanced approach that combines stimulus and austerity measures.
Suthiwartnarueput has made it clear that there is no need for further economic stimulus at this time. However, he has expressed concerns about Thailand's fiscal stability, particularly in light of the country's rising debt-to-GDP ratio. He has warned that a weak financial position could lead to a downgrade of Thailand's credit rating.
Over the past five years, spending in Thailand has grown at an average of 4%, while revenue has increased by only 1.7%. Suthiwartnarueput has not yet seen a framework for fiscal sustainability and has emphasised the need for prudent monetary policy, financial sector stability, and appropriate liquidity management and risk monitoring to maintain Thailand's fiscal stability.
One area of particular concern for Suthiwartnarueput is the long-term outlook for loans to small and medium-sized enterprises (SMEs). Non-performing loans (NPLs) for SMEs currently stand at 7%. To facilitate the recovery of SME credit, Suthiwartnarueput believes that government support mechanisms, such as credit guarantees, are necessary.
Suthiwartnarueput also addressed the ongoing challenge of household debt, suggesting that solutions must focus on increasing people's incomes and restructuring debt. He has urged the government to save its resources for a genuine crisis and to tighten belts to rebuild a stable fiscal foundation for the medium term.
In addition, Suthiwartnarueput believes that a healthy economy rests on three pillars: fiscal policy, the balance of payments and currency, and debt from financial institutions. He has stressed that fiscal stability is a critical area that requires special attention.
In conclusion, Suthiwartnarueput's address underscores the need for careful fiscal management in Thailand. By emphasising the importance of prudent monetary policy, financial sector stability, and support for SMEs, Suthiwartnarueput is working to ensure a stable and sustainable economic future for Thailand.
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