Thai Government prioritizes big business over its people via pressuring the Central Bank

The Thai government led by the centre-right Pheu Thai Party is pressuring the Central Bank of Thailand to agree to interest rate cuts to stimulate the economy, which the Chief of the Central Bank has stressed would not work. As a Malaysian national, with a Thai partner, this is of special importance to my heart - not just in terms of stability for my partner’s family but also the stability of trade relations with ASEAN (their top exporter) and the United States (their second top exporter). How would this contribute to instability and continued oppression of Thais under the heavy hand of corporate business? 

Monetary Policy and its impact

Monetary Policy is the set of tools used by the central bank to help sustain economic growth and control inflation by controlling money supply through altering reserve rates and by raising or lowering the Overnight Interest Rates. For the sake of this piece, the interest rates and its impacts will be highlighted. Should a central bank raise its interest rate, it would mean that the economy is very hot, and doing too well - which leads to unsustainable economic growth and needs a time of cooling off. This will result in more savings, less borrowing, less expansion of business and the potential for very controlled rises in unemployment - if managed correctly. The adverse effects also hold true. Uncontrollable interest rate alterations in either direction can lead to price instability and economic uncertainty. 

Central Bank independence

Central Bank Independence as a concept and idea actually stemmed from the 1920s in the Brussels International Financial Conference. The general idea was to come together to build a stronger global economy for post Great War stabilization around the idea of many different ideas like globalization, but more importantly to this conversation, sound monetary policy led by independent central banks. The aims and goals of central bank independence is to ensure the stability of a nation’s financial institutions. Independent central banks have been found to be more effective when ensuring price stability, overseeing the stability of financial institutions and helping economic growth that is stable and sustainable. By being, essentially, a technocratic institution - free from political influences, it allows central banks to prioritize the well-being and long term stability of the country’s economic position from being rather short-sighted in their goals and the narrative that they should “please the people now”.

State of Thailand’s economy

One of the major units in the economy is consumption from private citizens. However, citizens are not doing well in the slightest. According to the University of the Thai Chamber of Commerce (UTCC) figures released on September the 13th, the average Thai household debt grew from 143,000 Bahts in 2009 to 606,378 Bahts in 2024; a whopping 324% increase in just 15 years, and major contributors included insufficient income, unexpected expenses, and the rise in cost of living. While average, working class families in Thailand are suffering, large companies, and the top 5% saw their income grow by 80% to 90% in the same period. The governments of Thai Prime Minister Paetongtarn Shinawatra and her predecessor Srettha Thavisin have urged a rate cut to add to their fiscal stimulus package, including the imminent rollout of a flagship scheme to give 10,000 baht handouts to 45 million Thais to spur activity. With the Baht strengthening against the U.S. Dollar, many expected interest rates to lower, but the Chief rejected these speculations citing that the gains were in response to a weak dollar and spike in gold prices. The central bank is closely monitoring the currency as it doesn’t favor excess volatility. The neoliberal nature of the economy makes it so that poorer folks in Thailand are begging at the feet of corporations for a job to pay off their debt and a rate cut would only exacerbate it and most, if not all the benefits would go to the richest in Thai society.

Alternative to the government policy

This is a short-sighted policy aimed at short term solutions which will inevitably bring the Thai economy to its knees in the long term. By also exerting political influence on the central bank, the central bank would, as what the Chief has said, “lose track and lose its long term vision”. The correct policy in this scenario would be to do a large deal, similar to the New Deal in 1929. The government must spend more money to strengthen the economy by approving a greater stimulus check for the economy. Implement extensive student debt relief, increase taxes on the largest corporations to pay for programmes and increase funding for widespread infrastructure for greater labour mobility and resource mobility to increase production for less cost via economies of scale. Make the economy more productive, and yield a trade surplus for a stronger Baht. 

With this, we can ensure that the people of Thailand have a stable economy to thrive in.