[BANGKOK] Thailand has room for more monetary policy easing to support an economic recovery but needs to watch for risks to financial stability and keep some leeway for future changes, the International Monetary Fund (IMF) said on Wednesday.
Thailand's economy grew 2.8 per cent in 2015, a year after political turmoil brought the country to the brink of recession. But growth continues to undershoot most other South-east Asian economies and there are downside risks to the IMF's forecast for 3 per cent growth in 2016, the fund said.
"The current accommodative monetary policy stance is appropriate," the IMF said in a statement after completing its annual review of South-east Asia's second-largest economy.
"Going forward, while there is room for further easing, this should balance support for the economy against financial stability concerns and the need to preserve policy space."
The Bank of Thailand (BOT) has not cut rates for over a year, with the benchmark at 1.5 per cent already near an all-time low and amid concern that an even lower rate could encourage households already holding record debt to spend beyond their means. It next reviews policy on June 22, and most economists expect no change for now.
BOT governor Veerathai Santiprabhob has also voiced concern about the potential for instability as Thai investors put money into higher risk instruments in their search for yield.
For a long and lasting recovery, Thailand needs an expansionary macroeconomic policy mix, financial stability safeguards and structural reforms to boost potential, the IMF said.
The IMF maintains its forecast for Thailand's growth to rise to 3.2 next year but warned of headwinds from the global economy, domestic political uncertainty and structural bottlenecks.
The IMF said it welcomed Thailand's plan to assess the merits of joining the Trans-Pacific Partnership Agreement (TPP).
"More than just boosting trade and investment, the TPP could catalyse momentum for structural reforms and industrial transformation," it said.
If Bangkok decides not to join, investment flows could be diverted away from Thailand toward TPP members seeking greater access to the United States and other TPP markets, it said. "Thailand would be one of the most negatively impacted countries in terms of income and export losses," it said.
The TPP currently has 12 members in a bloc comprising countries from Australia, Canada, and Japan to Vietnam and Chile in a trade area of 800 million people, worth about 40 per cent of the global economy.