(Bloomberg) -- Thailand’s Finance Minister Pichai Chunhavajira and Bank of Thailand Governor Sethaput Suthiwartnarueput are scheduled to hold talks next week amid mounting pressure on the central bank to act to temper a currency rally that’s threatening the nation’s exports and tourism.
Discussions will cover all economic topics including the baht’s surge as well as setting a new inflation target for next year, Pichai told reporters on Tuesday. Separately, Prime Minister Paetongtarn Shinawatra said she had assigned Pichai to liaise with the central bank to find solutions to deal with the currency rally and high interest rate.
“We have to talk, and if we can’t find a joint solution, people will suffer,” Paetongtarn said. “We need to help each other as we already understand what the impact of a strong baht is.”
While the baht’s spike in recent months has become a cause for concern because of the negative impact on farmers and exporters, the rally is beneficial for imports and foreign debt repayments, Paetongtarn said. But it’s necessary to take steps to deal with it, she said.
The Pichai-Sethaput meeting will be the first after Paetongtarn was elected prime minister last month and comes amid efforts by her administration to tighten its grip over the central bank which has ignored repeated calls to cut the key interest rate from its highest level since 2013.
On Monday, Thai business groups asked the government and BOT to stabilize the baht, which is up about 11% since the end of June as the dollar weakened in anticipation of US Federal Reserve’s rate cuts and foreign funds poured money into the Southeast Asian nation’s bonds and stocks. A stronger baht is also set to curb spending by foreign tourists during the so-called high season, according to industry groups.
The University of Thai Chamber of Commerce estimated the initial economic damage from the baht’s rally at 50 billion baht ($1.5 billion), mainly from the hit to exports. The cost will rise to 130 billion baht by the end of the year if the currency traded at around 33 baht to a US dollar.
Thai Rate Setters Back BOT Inflation Target as Review Nears
Pichai’s meeting with Sethaput will also be keenly watched to see if they can strike a consensus on inflation target for next year. Pichai has been pushing for a higher range for next year, while Sethaput has argued that the current 1% to 3% is appropriate for Thailand’s economic and financial conditions.
BOT has kept the key rate steady at 2.5% since the fourth quarter of 2023 even as inflation stayed below the target range for most part. Sethaput reiterated last week that the monetary policy would be guided by the outlook for domestic economic and financial conditions and inflation, and won’t be swayed much by the US Feds’ interest rate moves.
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