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By Thanadech Staporncharnchai and Orathai Sriring
BANGKOK (Reuters) - Thailand's current potential economic growth rate of 3% is not satisfactory and prolonged below-target inflation is dangerous for the economy, a deputy finance minister said on Monday, urging the government and central bank to better align policies.
Southeast Asia's second-largest economy expanded only 1.9% last year, lagging regional peers, as it faced weak exports, high household debt and borrowing costs. The government has said growth will be driven to 3% this year.
Paopoom Rojanasakul made the comments on a local YouTube channel, where he said the government was trying to attract new investment and industries to raise the potential growth rate.
If nothing more is done, the potential growth rate would be around 3% and the economy would expand at the lower end of 2%, he said.
"That is not something the government is happy about," he said, adding fiscal policy was working fully to help growth.
Separately, Paopoom told reporters the government will meet on July 15 to discuss a flagship household handout scheme worth 500 billion baht ($13.7 billion), to be rolled out in the fourth quarter.
On the YouTube channel, Paopoom blamed fiscal and monetary policies not working well enough together in order to help growth reach its potential.
"I would like us to work together and have a similar way of thinking about managing the economy," he said, referring to the government and the central bank.
The government has been in disagreement with the Bank of Thailand (BOT) for months over interest rates, with Prime Minister Srettha Thavisin calling for a rate cut to kick-start the economy.
Despite the pressure to ease policy, the BOT held its key interest rate steady at 2.50% last month, the highest level in over a decade. The next rate review is on Aug. 21.
Last week, BOT Governor Sethaput Suthiwartnarueput said there was no need currently to cut rates and that structural reforms were needed to boost economic growth, rather than stimulus measures.
Paopoom said inflation running below the BOT's target range of 1% to 3% for a lengthy period was a problem for the economy.
The government wants to adjust the inflation target range, which has been in place since 2020, saying a change should raise the chance of a rate cut.
Sethaput said last week resetting the target range would put at risk credibility, inflation expectations and borrowing costs.
($1 = 36.46 baht)
(Reporting by Thanadech Staporncharnchai and Orathai Sriring; Editing by Ed Davies)
