Inflation too low, says finance minister

Thailand’s inflation rate needs to be around 2% to support economic growth, says Finance Minister Pichai Chunhavajira.
Speaking after a meeting between the Finance Ministry and the Bank of Thailand on Tuesday to set the inflation target for 2025, Mr Pichai said he had no issue with the target at any level, including the current 1-3% range.
However, average inflation should be at a reasonable level, and he said he believes the median rate for Thailand should be around 2%.
The headline inflation rate was 0.6% year-on-year in September and averaged 0.2% for the first nine months, taking into account contractions in the Consumer Price Index early in the year.
Even if inflation rises slightly, Mr Pichai said the Thai economy can handle it.
“I have no issue with the inflation range remaining at 1-3%, but an actual inflation rate below 1% is unacceptable,” he said.
“Raising inflation requires additional measures to support economic growth. Measures to encourage higher inflation and lower interest rates can promote domestic investment.”
Mr Pichai said that if inflation averages 2% and gross domestic product grows by 3.5%, this would yield a nominal GDP of 5.5%. At this level, the government could increase borrowing to 770 billion baht but still keep public debt below the maximum allowable level of 70% of GDP.
Increased domestic investment, he added, would push interest rates down. More investment leads to increased consumption, which would further stimulate inflation.
The central bank’s policies, especially those of the rate-setting Monetary Policy Committee (MPC), aim to align monetary policy to support the government’s economic growth goals, including managing the exchange rate to support the economy, said Mr Pichai.
Every country has tools to manage its exchange rate, though this does not necessarily imply intervention that disrupts natural market principles, he said, adding that Thailand must evaluate the movements of the baht against those of its competitors.
“I would like both the exchange rate and inflation policies to support economic growth,” he said.
Tuesday’s agreement could be interpreted as a small victory for Bank of Thailand Governor Sethaput Suthiwartnarueput, who has pushed back against government calls for a higher inflation target.
He said a higher target would “unanchor” market expectations, and stressed that the surprise cut in the benchmark interest rate earlier this month was not the start of an easing cycle.
The final MPC meeting of the year will be held on Dec 18.