Thailand should be more aggressive in cutting borrowing costs given its bleak growth outlook and subdued inflation, according to Somprawin Manprasert, one of the candidates seeking to become the Bank of Thailand’s new governor.
The benchmark rate, currently 1.75%, can be cut by 75-100 basis points, Mr Somprawin said in an interview in Bangkok. The central bank should also “explicitly” state that it’s in an easing cycle, to loosen tight financial conditions and ensure banks pass through more of the rate reductions to customers.
“Given the state of the Thai economy now — it is projected that GDP growth this year will be 1.5-1.8% and inflation will be within range — it is rational to say that the policy rate should be cut to ease financial conditions and arrest the cycle of economic downturn,” Mr Somprawin said.
Mr Somprawin’s views are aligned with those of the government, which has been pressuring the central bank to reduce rates to boost growth. But they’re in stark contrast to outgoing BoT Governor Sethaput Suthiwartnarueput, who says there’s limited room for further easing after the first back-to-back rate cuts since 2020 took cumulative reductions since October to 75 basis points.
The former chief economist at SBC EIC, the research arm of Siam Commercial Bank, Mr Somprawin is one of seven candidates in the running to succeed Sethaput, who is due to complete his five-year term on Sept 30. Mr Somprawin, 50, and other hopefuls will outline their vision before an independent selection panel on June 24.
Mr Somprawin is pitted against Vitai Ratanakorn, president of state-owned Government Savings Bank; Bangkok Bank’s Senior Vice President Kobsak Pootrakool; BoT Deputy Governor Roong Mallikamas and others. The candidates’ views will be closely watched by Finance Minister Pichai Chunhavajira, who has said the new BoT chief should be “forward-looking with modern ideas” and “support government policies.”
Further easing would boost growth, helping ease the burden of high debt levels on households and small and medium enterprises, Mr Somprawin said.
Prime Minister Paetongtarn Shinawatra’s administration has similarly been pushing for lower rates and singling out household debt reduction as a priority.
Mr Sethaput, who was appointed governor by a military-backed government five years ago, often clashed with the Pheu Thai Party-led administration that took power in 2023. He long resisted calls to cut rates and pushed back against a bid to set a higher inflation target, though he has since lowered borrowing costs amid threats to growth from US tariffs.
Mr Somprawin, who has a master’s degree in economics and finance from the University of Warwick and a doctorate from the University of Maryland at College Park, said he favoured maintaining a sound foreign exchange reserve position to ensure “problems in the real sector are not transmitted to the financial sector.”
The banker said he also favours Thailand cutting its reliance on dollars and transacting more in other currencies, in proportion to its trade.
Whoever becomes the BoT’s next governor, a tough job awaits him, Mr Somprawin said, adding he or she will have to coordinate with other policymakers to address the country’s problems.
“At this moment, we need all parties to help the Thai economy,” Mr Somprawin said.