BANGKOK – Thailand’s move to name veteran banker Vitai Ratanakorn as the next central bank governor was unexpectedly delayed after the planned nomination ended up not being considered at a Cabinet meeting.
Mr Vitai, president of the Government Savings Bank (GSB), was poised to be picked by Finance Minister Pichai Chunhavajira to run the Bank of Thailand (BOT), people familiar with the matter said on July 15.
Before entering the Cabinet meeting, Mr Pichai had told reporters he planned to propose the BOT chief appointment, but afterward said his submission was too late and set for next week instead.
“It’s an important appointment, and I submitted it a little too late. The cabinet needs to look at this a little more carefully,” Mr Pichai said. He also denied any attempts to block the planned nomination.
The 54-year-old Vitai, an advocate of lower rates and coordinated fiscal and monetary policy to help revive the faltering economy, is widely seen as a proxy candidate for the Ministry of Finance.
The appointment may renew concerns about the independence of the BOT, which under Governor Sethaput Suthiwartnarueput has resisted pressure for rate cuts and a higher inflation target.
Similar tensions have been seen elsewhere, with US President Donald Trump having publicly derided Federal Reserve Chair Jerome Powell and called for deeper rate cuts from the Federal Reserve.
In an interview with Krungthep Turakij newspaper on June 24, Mr Vitai said rate cuts are a “key and necessary tool” to tackle high household debt, suggesting that while he understood the BOT’s concern that lower rates could lead people to take on more debt, the benefits outweigh those concerns.
“Lowering interest rates, injecting money or lowering taxes alone cannot solve all the problems,” he said.
“Monetary and fiscal policies and measures from other regulatory agencies must be coordinated in the same direction and continuous.”
After the Cabinet meeting ended without an appointment, the baht gave up some losses, falling 0.1 per cent against the dollar on July 15, while the benchmark 10-year sovereign bonds held on to their gains, with the yield dropping 3 basis points.
“If the economic situation gets more dire, a rate cut or two may be justified in the near term,” but structural reforms, not “quick fixes” will be needed to improve longer-term prospects, said Ms Erica Tay, an economist at Maybank Securities.
“We are hopeful that the BOT’s decisions will remain grounded in rigorous analysis,” she said.
Under Mr Vitai, state lender GSB spearheaded efforts to provide financial relief to small businesses and households burdened by heavy debt in the post-Covid-19 era.
The other finalist in the selection process, Ms Roong Mallikamas, is a deputy governor at the central bank who was widely seen as a continuity candidate.
“While a veteran banker as a governor might be interpreted to be dovish bias, we believe BOT policy outlook will depend on a range of domestic factors like inflation and growth outlook,” said Mr Wee Khoon Chong, senior Apac market strategist at BNY.
“We see limited space for aggressive rate cuts. Supportive BOT monetary policy and government fiscal policy in our view is a more effective combination.”
The policy rate should be significantly lowered for a sustained period to revive the stagnant economy, Mr Vitai told local media after applying for the governor’s role. But more important than rate cuts is the need to ensure commercial banks pass on the reduction to customers.
“This is a deep and prolonged downturn, and while interest rate cuts are necessary, they are not enough,” Mr Vitai said, according to a Bangkok Post report on June 23. “Additional supportive measures are required.”
The next Bank of Thailand governor faces a challenging economic landscape, including the region’s highest household debt, sluggish credit demand, negative inflation and weakening consumption.
Despite a cumulative 75-basis point reduction in borrowing costs since October, growth lags that of neighbours Indonesia, Malaysia and Thailand, and is further threatened by the prospect of a punitive US tariff on Thai exports and a slowdown in foreign tourist arrivals.
That is on top of domestic instability which earlier in July saw a court suspend Prime Minister Paetongtarn Shinawatra from office.
The current governor, Mr Sethaput, has repeatedly spoken of the importance of central bank independence, having repeatedly faced government calls to lower borrowing costs.
A backlash from former BOT chiefs and economists in 2024 also helped thwart a government bid to install its favored nominee as BOT chairman, a separate role that is influential in appointments and other matters.
Mr Vitai, whose planned appointment was earlier reported by the Krungthep Turakij and Manager media outlets, will have critical influence as head of the central bank’s policy panel.
The BOT in June left the key rate unchanged at 1.75 per cent, citing the need to preserve limited policy space to respond to future shocks.
He has defended himself after being criticized by an ex-BOT governor who said the banker would not be able to make independent decisions because of his ties to the government.
“My experience and strong self-identity offer the confidence that I can make decisions independently, based on principles,” he said in a Facebook post on July 8. “Seeking the best interest of the country is important, without being influenced by any group.” BLOOMBERG
