• The Bank of Thailand (BOT) is ready to collaborate with the finance ministry, despite differing views on economic growth.
• The BOT has maintained its stance on the key interest rate, awaiting potential changes in economic policies by the new government.
• Thailand's economy shows signs of recovery, with the BOT ready to adjust policy rates as needed.
• The BOT's readiness to work with the finance ministry could shape Thailand's economic trajectory in the coming months.

Thailand's central bank, the Bank of Thailand (BOT), has recently expressed its readiness to collaborate with the finance ministry, despite having differing views on certain issues. This statement was made by the BOT Governor, Sethaput Suthiwartnarueput, during a press conference. He emphasized that the bank's independence comes with accountability, and they are prepared to work with anyone.

This statement comes in the wake of the newly sworn-in Prime Minister, Paetongtarn Shinawatra, labeling the central bank's independence as an obstacle to economic growth. Paetongtarn's predecessor, Srettha Thavisin, who was dismissed as prime minister by court order, had also repeatedly called for the central bank to cut interest rates to support growth. Both Paetongtarn and Srettha belong to the same political party.

The BOT, however, has maintained its stance on the key interest rate, leaving it unchanged for a fifth consecutive meeting. The bank has stated that the current level is neutral as it waits to see whether the new government under Prime Minister Paetongtarn Shinawatra would change economic policies.

Economic Policies and Growth Projections

We are ready to make adjustments that are appropriate to the situation, Sethaput said. If the outlook changes, then we are ready to adjust policy rates. Paetongtarn has indicated that she would continue but review the government's flagship digital wallet cash-handout programme worth 500 billion baht ($15 billion). This programme has been a significant part of Thailand's economic policy.

Thailand's economy has shown signs of recovery, growing 2.3% in the April-June quarter from a year earlier, accelerating from the 1.6% growth in the previous three months. However, analysts have expressed concerns about fiscal policy uncertainty clouding the outlook. Sethaput, on the other hand, has stated that the outlook for the economy and inflation remained in line with forecasts. In June, the central bank projected economic growth of 2.6% this year after last year's 1.9% expansion, which lagged regional peers.

The BOT has also indicated that it will use a policy mix to address the uneven recovery in Southeast Asia's second-largest economy. This approach is a departure from relying solely on interest rates to fix economic problems.

Addressing Economic Recovery and Inflation

This strategy was outlined at the Vision for Thailand forum organized by the Nation Group. The forum also saw former prime minister Thaksin Shinawatra, father of Ms. Paetongtarn, advocating for the handout plan to boost a sluggish economy.

The slower recovery of Thailand's economy is largely due to the nation's heavy reliance on tourism, which has been slower to rebound than other industries. The central bank has acknowledged that many households are still grappling with rising inflation. Prices of fuel and fresh foods, in particular, have continued to rise, with gasohol 95, vegetable oil, and eggs increasing by 40%, 32.5%, and 25%, respectively, over the past five years.

In a historical context, the relationship between central banks and finance ministries has often been a delicate balance. Central banks, like the BOT, are typically independent entities that make decisions based on economic indicators and forecasts. However, they also need to work closely with finance ministries, which are more directly involved in the political process and may have different priorities.

In conclusion, the Bank of Thailand's readiness to work with the finance ministry, despite differing views, is a significant development. It reflects the bank's commitment to its role in supporting the country's economic growth and stability. The bank's approach to addressing the uneven economic recovery, coupled with the new government's review of the digital wallet cash-handout programme, could potentially shape Thailand's economic trajectory in the coming months. This development is a testament to the delicate balance that central banks and finance ministries must maintain to ensure economic stability and growth.