Bangkok Bank executive chairman Kosit Panpiemras has warned the government not to implement a domestic stimulus to spur economic growth this year in order to keep a lid on household debt.
The warning came as the policy rate-setting committee yesterday kept its rate unchanged.
Public investment should be the key engine driving economic growth, Mr Kosit said during a bank seminar.
With growth forecast at 4% next year, the household debt-to-GDP ratio will automatically decline, he said.
Household debt rose to 9.87 trillion baht or 82.7% of GDP in the first quarter, up from 9.79 trillion or 82.3% in the fourth quarter last year, according to central bank data.
"It should rather encourage household savings from the low level of 5% of GDP from 2011-12. Household savings should be 10%, the same level as 1990-2000. Higher household savings will power domestic consumption in the long run," he said without identifying the current level of household savings.
The Bank of Thailand's Monetary Policy Committee (MPC) voted unanimously to maintain its 2% policy interest rate for the fourth consecutive meeting. However, two members — Narongchai Akrasanee and Arkom Termpittayapaisith — were absent from the meeting.
Mathee Supapongse, secretary of the MPC and assistant governor of the Bank of Thailand, said the current policy rate remained conducive to growth amid a nascent economic recovery, and the rate posed no risk to financial stability.
"The latest data suggest that improving private confidence and a rebound in private and public spending have shored up domestic demand, which should help to sustain the economic momentum," he said.
"On the fiscal side, the government has been trying to stimulate the economy, and the results will have to be anticipated further."
The MPC still projects a V-shaped recovery supported by public spending, non-durable goods consumption and retail sales, said Mr Mathee.
He said forecasts for economic growth and exports this year and next had been revised, but the announcement would be made next Friday.
Swelling household debt has been stabilised and its upsurge ratio declining, while the property sector has recorded some signs of a pickup, he said.
Regarding market speculation that the US Federal Reserve will end its asset purchase next month, the committee considers this a sideline factor for its policy rate decision since the Fed has not hiked its policy interest rate yet and the potential end of the taper — if that is the case — has been largely expected, said Mr Mathee.
Meanwhile, Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office, said economic growth would come in at 4-5% next year, rising from the FPO's 2014 forecast of 1.5% to 2.6%. The improving economy next year will be supported mainly by government investment. The private sector, however, will face financial market volatility from both foreign exchange and interest rates. Firms should lock in the existing low financial costs in preparation for higher costs and market uncertainty next year.