Thai central bank says outlook, not short-term data, more important for rates

Thailand's inflation is slowing this year but could exceed 3 per cent in 2024 on higher food prices. PHOTO: REUTERS

Published Wed, Oct 11, 2023 · 01:00 PM

THAILAND’S central bank will focus more on the broader economic outlook when setting monetary policy to ensure a sustainable economic recovery, not short-term data, senior officials said on Wednesday (Oct 11).

While the slow recovery of tourism and weak exports were weighing on broader growth, “the economic recovery is going as expected, led by domestic demand”, Bank of Thailand (BOT) director Phurichai Rungcharoenkitkul told an analysts’ forum.

The central bank has to “look through the noise” and not be overly sensitive to short-term data which had many uncertain factors, he added.

On Sep 27, BOT’s policy committee unexpectedly voted unanimously to increase the one-day repurchase rate by a quarter point to 2.5 per cent, the highest in a decade, saying economic growth and inflation should pick up next year.

Financial conditions in Thailand had tightened but were still supportive of a recovery, minutes of the central bank’s Sep 27 monetary policy meeting showed on Wednesday.

The central bank cut its 2023 economic growth forecast to 2.8 per cent from 3.6 per cent projected earlier, but raised its 2024 growth outlook to 4.4 per cent from 3.8 per cent. Last year’s growth was 2.6 per cent.

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South-east Asia’s second-largest economy has been hobbled by slackening global growth, particularly in its main trading partner China, and falling investor confidence due to a protracted period without a government following the last general election in May.

The economy grew 1.8 per cent in the April-June period year on year, and 0.2 per cent on the quarter, sharply slowing from the previous three months.

Monetary policy should take into account the growth and inflation outlook, including upside risks from government policies to boost economic activity, the minutes showed.