Monetary authority leader advocates for extended reduction in interest rates
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Hey, check this out! Vitai Ratanakorn, President of Government Savings Bank (GSB) and a Bank of Thailand governor hopeful, has proposed some game-changing ideas to revive Thailand's sluggish economy.
First things first, Vitai believes the interest rate needs a significant drop and should stay low for quite some time. But it's not just about cutting rates, right? He's focusing on ensuring that commercial banks pass these rate cuts onto their customers by lowering their lending rates. Historically, banks have been hesitant to decrease lending rates when policy rates go down.
To make monetary policy more effective, Vitai suggests improving its transmission mechanism. In simpler terms, he wants to ensure that when interest rates are cut, the decrease is noticed in bank loans, too. Limited reductions can weaken the impact of the policy, according to him.
But let's talk bank lending. Vitai points out that it's been contracting due to a slow economy and strict lending criteria from banks. To remedy this, he's thinking about implementing a credit guarantee scheme for loans, like home and car loans, that haven't been covered before. By reducing the cost of credit for banks, they might be more likely to lend. And speaking of banks, GSB is planning a 100 billion baht soft loan offer with ultra-low interest rates for exporters, SMEs, and tourism-related businesses.
Vitai also plans to help borrowers bear the weight of the economic downturn. He'll drop the interest rates for existing clients by 2-3%, offering them some financial relief during the recovery phase.
Now, the elephant in the room – structural issues. Vitai acknowledges ongoing challenges like a slow tourism sector and uncertainties from external factors. To tackle these, he advocates for combined monetary and fiscal policies and collaborative efforts across financial institutions and government bodies.
In Vitai's view, through joint efforts and supportive measures, the economy can gradually recover without reaching a crisis level. So, that's the lowdown on Vitai's proposals – let's see if they'll help Thailand shake off its economic stagnation!
The business sector might greatly benefit from Vitai's proposals, as he suggests lowering lending rates for exporters, small and medium enterprises, and tourism-related businesses through GSB's soft loan offer. Moreover, to stimulate the economy, Vitai aims to reduce interest rates for existing borrowers, providing much-needed financial relief.
