Thai junta looks for new central bank governor and fewer surprises

Thailand's Central Bank Governor Prasarn Trairatvoraku. PHOTO: REUTERS
Thailand's Central Bank Governor Prasarn Trairatvoraku. PHOTO: REUTERS

BANGKOK (REUTERS) - As Thailand's independent-minded central bank governor Prasarn Trairatvorakul nears the end of his term in September, the country's junta is busy looking for a replacement whom observers say would be less likely to spring surprises.

The Bank of Thailand and the country's previous governments had occasionally clashed in their views on monetary policy. But since the current military government seized power last year, there has been no public conflict between Mr Prasarn and the junta.

Still, the central bank made two surprise interest rate cuts this year, taking its policy rate to a near record low of 1.5 per cent and fuelling market speculation the Bank of Thailand and the junta do not necessarily follow the same policy schedule.

In the junta's search for Mr Pasarn's successor, neither of his two deputies made the short list for the job, contrary to market expectations. Instead, the two people being considered are outsiders - Veerathai Santiprabhob, a member of a so-called "super board" appointed by the junta to oversee state firms, and Supavud Saicheua, the managing director of Phatra Securities.

As the military government tries to revive Southeast Asia's second-largest economy, "fiscal and monetary policies need to be in sync - not with one person stepping on the brake while the other steps on the accelerator," said Kobsidthi Silpachai, head of capital markets research at Kasikornbank in Bangkok. "As to facilitate effective economic teamwork, it would be expected that the BOT readily coordinates its monetary policy with the finance ministry," he said.

The junta has struggled to turn around weak exports and domestic demand, after seizing power in May last year to end months of political unrest. Protests paralysed Thailand's government in the first half of 2014, hurting tourism and consumer and investor confidence.

Gross domestic product grew 0.9 per cent last year, the slowest since flood-hit 2011. The central bank expects the economy to expand 3 per cent in 2015.

The Bank of Thailand has said more could be done on the fiscal side to support growth rather than simply relying on lower interest rates. So far, the junta has not announced any specific fiscal measures.

A decision on the governor position is expected to be made by Finance Minister Sommai Phasee next week.

Both the candidates "seem to be on a dovish side, in that they prefer rate cuts and a weaker baht to support exports,"said Tim Leelahaphan, a Bangkok-based economist at Maybank Kim Eng.