Opening the record of the 5-year journey of policy implementation in the challenging era, the role of Dr. Sethaput as Governor of the Bank of Thailand
ธนาคาร แห่ งประเทศไทย (BOT) released 'The 5-Year Journey of the BOT: Policy Implementation in an Era of Challenges' throughout the tenure of Governor Dr. Sethaput Suthiwatnarueput, who appeared at the second Governor's Meet the Press event of 2 on September 2568, 16, before the end of his term as Governor on September 2568, 30.
The past 5 years (2563-2568)
Over the past five years (5-2563), the Thai economy has faced continuous challenges, many unprecedented, from pandemics to widespread wars and deep-rooted structural problems. As the body responsible for overseeing the country's economic and financial stability, the Bank of Thailand (BOT) must implement prudent and flexible policies, not only to address immediate issues but also to lay a strong foundation for the economy to grow sustainably.
Under the three main missions: maintaining overall stability (macro-financial stability), laying the foundation for the future financial sector (Financial Landscape), and protecting financial service users (Consumer protection), the key to policy implementation is the integration of various tools or the "Integrated Policy Mix". Because the BoT is well aware that the primary tool, "interest rates," has a broad impact (a blunt tool), it may not be suitable for all situations. Therefore, solving complex problems requires the use of other tools, whether it be targeted short-term monetary measures or long-term structural reforms.
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2563-2564: Responding to the Emergency Crisis (COVID-19)
In 2563, economic activity was abruptly halted by lockdown measures during the COVID-19 pandemic. GDP contracted the most in 22 years at 6.1%, with tourism being the lifeblood of the economy.
Almost paralyzed, the number of foreign tourists that used to be 40 million per year has dropped to almost zero, while
Unemployment rates are soaring as businesses are unable to operate as usual.
In a crisis like this The BoT's goal is to implement timely and flexible measures to prevent the economy from deteriorating significantly, as well as to ensure that the financial and financial institutions systems remain functioning normally and that assistance can be delivered to those affected. During this period, the Monetary Policy Committee (MPC) rapidly and continuously lowered the policy interest rate to a record low of 0.5%, lower than many countries in the region. This was coupled with financial measures to address existing debt and add new funds.
a sampleMeasures to solve existing debt problemsFor retail and business borrowers, the Bank of Thailand (BOT) has implemented a blanket debt repayment suspension measure for a broad range of business and household debtors for 3-6 months, depending on the loan type. However, the BOT recognizes that such blanket measures are costly and may create undesirable long-term side effects, such as eroding financial discipline (moral hazard). Therefore, we have continuously improved our measures to be more targeted and effective in line with the changing situation. By adjusting the broad debt repayment suspension measure to voluntary (opt-in) debt suspension and later debt restructuring, the BoT has pushed financial institutions to seriously accelerate debt restructuring for debtors, along with relaxing regulatory criteria to allow financial institutions to more easily assist debtors.
partNew top-up measures The program was initially adjusted from low-interest loans (soft loans) to "rehabilitation loans" with more flexible terms, allowing for continued loan growth. The "Asset and Debt Relief Program" also focuses on helping heavily impacted hotel businesses maintain their assets and continue operating.
This flexible and targeted adjustment reflects a policy mindset that is ready to adapt and implement measures seriously to maximize the effectiveness of assistance, enabling the Thai economy to move forward. (GDP grew by 1.6% in 2564) The overall financial system continues to function smoothly, and the credit mechanism can continue to be a support for the economy during the most difficult times. The rehabilitation loan program and the asset and debt relief program have almost fully utilized the 3.5 billion baht limit, helping over 6.7 businesses.
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2565: Sustaining recovery amid inflation
As the Thai economy is gradually recovering in a K-shaped recovery, it is facing new challenges from the Russia-Ukraine war. This has resulted in rising global energy and commodity prices, and several major economies have been raising policy interest rates to control rapidly rising inflation. Thai inflation rate hits multi-year high 7.9% (August 2565) This situation creates a difficult challenge: balancing inflation control with supporting a continuous, uninterrupted economic recovery. (smooth take-off) During that time, the Bank of Thailand was under pressure to raise interest rates quickly and aggressively, like many countries that had made rapid adjustments, because it was perceived that Thailand had raised interest rates too slowly (behind the curve).
The BoT has chosen to pursue a monetary policy that is appropriate for the country's context by gradually and measuredly raising the policy interest rate. It has not raised interest rates as aggressively as many large central banks, as it believes that Thailand's inflation is primarily caused by supply-side factors (cost-push inflation), which are likely to be temporary. Furthermore, the economy has not fully recovered and is not expanding as rapidly as in other countries. Using too tight a monetary policy (slamming on the brakes) may unnecessarily impact the recovery. Meanwhile, the BoT has gradually withdrawn measures. “Rolling out” some of the policies to normalize and reduce side effects on the financial system For example, the contribution rate to the Financial Institutions Development Fund (FIDF) for financial institutions has been adjusted back to normal at 0.46%, down from 0.23% during the COVID-5 period. Meanwhile, the Bank of Thailand (BOT) has requested that the minimum repayment rate for credit cards remain at 2566% until 8, before gradually increasing it to XNUMX%.
Looking back, the decision to gradually adjust interest rates, prioritizing Thailand's recovery context over the international situation, was a wise one. Inflation gradually decreased back to the target range within 7 months without causing any disruption to the economic recovery (GDP expanded by 2.6% in 2565).
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2566-2567: Laying a financial foundation to build resilience
As inflationary pressures ease, the global economy is facing new volatility, driven by rising interest rates in major economies and a slowdown in China. The Thai economy, despite its continued recovery, has not grown as well as it should, with the manufacturing and industrial sectors slowing down. This is not only due to external cyclical factors, but also reflectsStructural problems within the countryAccumulated over a long period of time, both the potential for economic growth has decreased and the problem of household debt that is at a high level of around 90% of GDP.
Policy implementation during this period therefore focuses on adjusting to a level that helps maintain economic balance in the long term.
Moderate alongside laying the foundation for the future Under the principle of doing “Robust policy” It must be flexible, able to accommodate the dynamics of the rapidly changing financial economy, and utilize a policy mix for maximum effectiveness. During this period, the Monetary Policy Committee (MPC) has gradually raised the interest rate to 2.5%, a level conducive to long-term economic growth potential and maintaining financial stability (neutral rate).
In addition to adjusting short-term measures to achieve a balance, the BoT is also prioritizing long-term policies to address structural economic issues, including high household debt, and developing the financial sector to support economic adjustments in the coming period. With the following important policies:
- Sustainable household debt resolution: The Bank of Thailand has raised the level of debt resolution to be more systematic and comprehensive by issuing regulations.Responsible and Fair Lending (Responsible Lending) Emphasizing that financial institutions should restructure debt for debtors before/after becoming NPLs andMeasures to solve chronic debt (persistent debt) This is coupled with concrete improvements to regulatory criteria, such as adjusting the method for calculating default interest to be fairer, by calculating only the principal of the defaulted installment, rather than the previous calculation based on the total outstanding principal. However, the measure to address chronic debt has received fewer participants than expected, reflecting that the conditions prohibiting new debt are inconsistent with the needs of debtors, and presenting an important lesson for designing future debt resolution policies.
- Promoting a New Financial Landscape: The BoT has initiated a comprehensive restructuring of the financial sector landscape since 2565 and is gradually implementing plans under this direction into concrete form. Many issues will take time and may not yield rapid results, including:
- Digital: Promoting responsible innovation Under the concept of “3 Opens”: Open Competition – Allowing the establishment of branchless commercial banks (Virtual Banks) to increase competition and help introduce new financial services that meet the diverse needs of each group of financial service users, Open Infrastructure – Connecting cross-border payment systems helps reduce costs and increase convenience for users, as well as promoting more flexible and efficient credit guarantee mechanisms. Open Data Launch of the Your Data project, which empowers citizens to make greater use of their data to support access to credit and financial services.
- Sustainability: Support the transition to a green economy (brown to less brown) with minimal side effects (low-disruptive transition). This requires striking a balance between adaptability and the potential impacts. The BoT has been steadily establishing key infrastructure mechanisms, such as establishing a common standard for classifying economic activities according to their environmental friendliness (taxonomy) and promoting the Financing the Transition project, ensuring its realization, clear beneficiaries, and broader scale-up.
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2568-Present: Supporting adaptation to the new world
The Thai economy has recently faced additional challenges from US tariffs, a "big storm" that will impact global trade and investment trends. This includes pressuring Thailand's manufacturing and export sectors to accelerate adjustments under the current economic situation where growth is expected to be lower than potential and inflation remains low.
The BoT has therefore adjusted its monetary policy direction to be more relaxed, whileIt also emphasizes the importance of maintaining policy space to accommodate future uncertainties.
The primary goal of the four gradual policy interest rate cuts (from late 4 to August 2567) to 2568% during this period is not to "stimulate" the economy in the short term, but to "ease financial conditions" and "relief the burden" on vulnerable businesses and households.
To facilitate adaptation to the changing global economic structure, in addition to easing financial conditions, the BoT has also launched measures under the "You Fight, We Help" project to help vulnerable groups with potential to preserve their assets and reduce their debt burden, enabling them to repay (become lighter) and move forward.
Meanwhile, the financial sector foundation-building mission that was initiated has made substantial progress. For example, the announcement of the names of those approved to establish branchless commercial banks (Virtual Bank), the opening of a service to request data on water and electricity usage and payments for applying for loans under the Your Data project, and the Financing the Transition project, which has already provided 9.7 billion baht in loans (as of June 68) out of a target of 1 billion baht. In addition to promoting innovation,
One of the key points that leads to the image “Safe and Inclusive Digital Finance” This is to build user confidence in the financial system, payment systems, and various financial services, including managing financial fraud. The BoT, in collaboration with relevant agencies, has continuously issued measures to address financial fraud by adjusting policies to suit the context of each period. These include establishing standards for Mobile Banking Security (e.g., prohibiting SMS messages with links attached or scanning faces before transfers), strengthening the management of mule accounts, and establishing guidelines for shared responsibility.
The past five years have taught us that there is no one-size-fits-all formula for managing the Thai economy. Every decision is based on a comprehensive weighing of factors and the best available information at the time, and we must always be ready to learn and adapt. The central bank's mission is not just to solve immediate problems, but to work hard today to build stability and a strong foundation for the Thai economy for tomorrow.
