2024 has been an eventful year marked by significant news stories and disputes, such as the conflict between the government and the Bank of Thailand over the country's policy rate.The entry of Chinese e-commerce giant Temu into the Thai market also raised speculation over the prospect of fiercer market competition.
Recently, all eyes were on Finance Minister Pichai Chunhavajira after he proposed that now is the right time for Thailand to consider raising the rate of value-added tax (VAT) from the current level of 7%.
His remarks drew criticism from some parties who disputed his assertion, suggesting now was not the right time to raise the rate of VAT rate due to the sluggish economic conditions. The criticism eventually died down after Prime Minister Paetongtarn Shinawatra dismissed the speculation, suggesting the idea was simply being deliberated.
Govt v. Bank of Thailand: year-long struggle over policy rate
Differing perspectives became evident during Srettha Thavisin's tenure
Somruedi Banchongduang
The conflict between the government and the Bank of Thailand over the policy rate has persisted throughout 2024.
The government has continued to urge the central bank to lower the policy rate to stimulate the economy, while the bank insists monetary policy is not the primary instrument for promoting growth.
Since the start of the year, the government has pressured the regulator to cut the policy rate, often conveying its stance ahead of Monetary Policy Committee (MPC) meetings.
The MPC convenes six times a year, with meetings held this year in February, April, June, August, October and December.
The government called for a rate reduction to help stimulate the economy, citing especially that Thailand recorded the lowest GDP growth rate among Southeast Asian nations.
Inflation remained subdued, falling below the central bank's target range.
However, the central bank argues the country's economy has been gradually recovering, albeit unevenly, while the inflation rate is projected to fall within the central bank's target range of 1-3% by late 2024.
The differing perspectives between the government and the central bank became evident after Srettha Thavisin assumed office as prime minister and finance minister.
In February, Mr Srettha called on the central bank to hold an emergency meeting to cut rates before the regulator's policy review on April 10, saying the economy was at a "critical" stage.
Early in January, he posted on X, accusing the central bank of damaging the economy by keeping its interest rate elevated even though inflation had waned for months.
This followed his speech in parliament on Jan 3 that suggested the central bank should take into account risks to the economy, including its fragile recovery, when deciding monetary policy.
Central bank governor Sethaput Suthiwartnarueput responded by saying he saw no need for an emergency meeting, reiterating that the problems weighing on the domestic economy could not be solved by reversing monetary policy.
Despite the discussions and the subsequent changes in leadership, with Paetongtarn Shinawatra becoming premier and Pichai Chunhavajira taking over as finance minister, the Bank of Thailand kept its policy rate unchanged for four consecutive meetings, starting from the first meeting in February.
However, at the October meeting, the MPC surprised many by cutting the policy rate for the first time in four years. The MPC voted 5-2 to reduce the policy rate by 25 basis points to 2.25%.
The rate had been at a 10-year high of 2.50% since September 2023.
Most analysts expect the MPC to maintain the policy rate at the December meeting, with further cuts potentially postponed until 2025.
