Thai businesses back cutting of policy rate

Thai business leaders across different sectors hope the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) will reduce the policy rate during the meeting tomorrow (Oct 16) to ease the financial burden on businesses.

The MPC has held the interest rate steady at 2.50% for over a year, explaining that the rate is suitable for Thailand's recovering economy.

Nathasit Diskul, president of Bangkok Aviation Fuel Services Plc (BAFS), said on Monday that he expected the policy rate to be cut by at least 0.25%, adding that the move would help several industries that are still shouldering debts incurred by the impacts of Covid-19.

“The Thai economy in the second half of the year remains fragile. Some sectors are recovering while others are contracting,” he said. “The tourism and aviation industries show signs of an increase in the number of flights, serving as the driver for the Thai economy.”

He went on to say that sectors such as property and manufacturing have shown clear signs of contraction as a result of rising household debts. The government must therefore continue to stimulate the economy, as well as boost investment in infrastructure projects.

Nathasit also believes that global oil prices could rise due to the ongoing conflict in the Middle East which, in a worst-case scenario, might see Iran closing the Hormuz Strait to traffic, affecting one-fifth of the world’s oil transport. In this scenario, oil prices are likely to go up by $30 dollar per barrel, and would exceed the $100 per barrel mark, he said.

Pokkhet Ratchakitprakarn, chief executive officer of Maxbit Digital Asset Ltd, said that cutting the policy rate would benefit economic growth in the next year, but added that Thailand would see results slower than other countries, which had earlier adjusted their interest rates.

The tardiness of the positive impact from a policy rate cut could also be made worse by the fast appreciation of the Thai baht against the US dollar, he added.

He predicted that regardless of whether or not the policy rate is cut, the digital asset market is expected to grow in terms of buying and selling volume in the last quarter of this year, as this trend has continued in the past several years.

Kessara Thanyalakpark, managing director at Sena Development, said that the real estate market has faced difficulties over the past nine months, with high interest rates and household debts leading to increased loan rejections, making it harder for Thais to buy a house.

“The outlook for 2025 is still concerning due to rising household debts. We would prefer the central bank to lower the interest rate, which will help those in vulnerable groups by decreasing the amount of repayments as well as increase people’s chance to receive housing loans,” she said.

Kessara added that the government should also relax its LTV (loan-to-value) regulations, which limit how much applicants can borrow, noting that it has caused the property market to contract in the past year.