Dr. Sethaput, Governor of the Bank of Thailand, addresses hot issues before leaving office: the strengthening baht, cracking down on mule accounts, and the future of the Thai economy.

On September 16, 2568, Dr. Setthaput Suthiwatnarueput appeared at the Governor's meeting with the media (Meet the Press) 2nd time in 2568  This was the last time he met the press.Before the end of the term of the Governor of the Bank of Thailand on September 30, 2568 He answered questions on various issues, including the strengthening baht and measures to crack down on mule accounts, as well as recommendations on what Thailand should do to create long-term economic growth.

• Unable to remain calm about the strengthening baht, discuss tax collection and use of dollars to buy gold

Dr. Sethaput spoke about the situation where the baht has strengthened significantly and it is strengthening compared to neighboring countries, which is something that the BoT does not want to see. The reason for the baht's strengthening is partly due to

1. A weakening US dollar This is inconsistent with the fundamentals, as the tax measures were supposed to strengthen the dollar but weakened it.

2. Gold, which is the reason why the baht is stronger than neighboring countries. The relationship between the baht and gold is 0.7%, so when the price of gold increases, the baht also strengthens.

The Bank of Thailand (BOT) has not been complacent about the strengthening baht. It has taken measures to manage the currency, such as reducing the policy interest rate. However, these reductions have not had a significant impact on the currency. Furthermore, the BOT has been mitigating currency volatility to prevent rapid and extreme movements that could negatively impact exporters.

“Thailand’s policy interest rate is lower than that of neighboring countries, but the baht is relatively strong compared to neighboring countries.”

On September 15, 2568, the BoT discussed with those involved in the gold industry how to reduce the impact of gold trading on the baht. They discussed two measures: 2. Collecting a gold tax and 1. Supporting gold trading in the US dollar.

"I emphasize that these two measures are only in the discussion stage and still require further discussions with various sectors."

“Regarding the unusually high gold exports to Cambodia, it appears that gold exports have strengthened the baht. However, we cannot say whether this is related to the grey market, but it is a matter that the government and the Bank of Thailand are prioritizing.

Regarding concerns about grey money or illegal business funds impacting the baht, Dr. Sethaput revealed that the total transactions reported in the balance of payments totaled $12.4 billion. However, there are a significant number of errors and omissions, coming from various sources, including cryptocurrencies, exports, and imports. As these figures become clearer, it will be possible to determine whether these are the causes of concerns.

• Apologies to honest people for the measures to suppress mule accounts.

Dr. Sethaput also stated that regarding people withdrawing money from banks due to concerns about measures to crack down on mule accounts, financial institutions currently maintain liquidity and are not experiencing deposit issues, even though some bank branches are using more cash. However, he insists that this is not a bank run.

"We understand that people in business find it difficult to make money and have to use it for their own needs. When transactions are suspended, it can be very difficult. We apologize for the inconvenience this has caused to honest people. However, we also ask for understanding from those who have been scammed. Some may have saved up for retirement and then had all their money taken away. Comparatively, this group may be more severely affected. Fraud is a major problem, and if left unaddressed, it can have serious repercussions."

However, the BoT has now expedited the timeframe for requesting a transaction suspension, allowing the process to be completed within four hours or at the latest within one day, allowing citizens to provide clarification in order to request the suspension.

Dr. Setthaput Suthiwatnarueput at the 2nd Governor's Meet the Press event of 2568

• The government should not just take short-term measures.

Dr. Sethaput discussed the new government's policy implementation, which is limited by time under the four-month dissolution of parliament. Fiscal policy implementation, whether short-term, medium-term, or long-term, must be consistent with fiscal stability in the medium and long term to maintain fiscal stability.

Over the years, successive governments have introduced a variety of economic stimulus measures. However, these stimulus measures have only provided short-term economic solutions. We should address these structural issues, as they will enhance the long-term growth potential of the Thai economy. This is a good and necessary thing to do, as it will show people that the government is also concerned with the long-term.

The "Half-Half" scheme can be implemented, but fiscal stability must be taken into account. The implementation of the scheme depends on the size and format to be implemented. If the scheme is large-scale and requires significant capital, the government must find ways to engage with the market, the public, and credit rating agencies, and demonstrate that Thailand's medium-term fiscal outlook remains sound. For example, a clear revenue generation plan, such as through tax collection (VAT), must be in place.

"The downside of economic stimulus policies is that they make people accustomed to them. This is evident in past instances where even after the crisis ended, these measures persisted. For example, in 2540, during the Tom Yum Kung crisis, Thailand temporarily reduced VAT from 10% to 7%, stating that it would only last for two years. However, as of 2, this measure remains in place."

• Revealing 3 things Thailand should do to create long-term growth

Dr. Sethaput said that what Thailand should do to create growth opportunities for the Thai economy in the future includes:

1. Government sector: Currently, Thailand's fiscal stability is not as strong as in the past. Government revenue growth has not kept pace with accelerated expenditures. Data from fiscal years 2562-2567 shows that government revenue grew by an average of 1.7%, while government expenditures grew by an average of 4% per year. If Thailand does not urgently restore its fiscal position to mitigate downside risks to the economy, it risks a downgrade in its credit rating.

"Special attention is required on the fiscal side. The incoming executive's homework is to ensure fiscal stability. There's no denying the need for stimulus, but fiscal ammunition is limited. Prolonged use risks the country being downgraded. This is a matter that needs careful consideration."

However, the issue of restoring the country's fiscal position may not necessarily need to be adjusted immediately. Rather, a clear picture must be presented and assurances must be made that adjustments will lead to balanced fiscal stability.

2. Financial sector: Increase access to funding for small businesses to facilitate adaptation. For example, support more flexible credit guarantee mechanisms, perhaps by streamlining the efficiency of the Small and Medium Enterprise Credit Guarantee Corporation (TCG). Promote risk-based pricing, and build financial resilience by enhancing financial threat management measures and supporting responsible innovation.

3. Private sector focuses on creating incentives for the private sector to adapt and for long-term productivity in order to reduce obstacles in business operations.

"The key to any policy is its implementation. During my five years as Governor of the Bank of Thailand, I encountered four prime ministers, which led to a loss of policy continuity. Therefore, we have now issued a set of guidelines for sustainable change, known as Reinvent Thailand, to ensure policy continuity. It serves as a rudder, guiding the way for anyone who comes in afterward."

• Reiterate: “Central bank independence” is a good thing

Dr. Sethaput addressed the issue of interference in the work of foreign central banks, saying that all economists believe that a country should have a central bank that is independent and able to function properly. History has proven this to be a good thing, and that undermining the independence of the central bank can lead to problems.

“We have seen in many countries that central bank intervention can lead to problems, such as confidence issues, which require a lot of attention and take a long time to build up. So this is a lesson we have learned from other countries that we should not forget.”

Read more

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