Thai central bank holds fire again, rates likely to stay on hold
Bangkok
THAILAND'S central bank left its key interest rate unchanged at a record low on Wednesday (Mar 30) despite rising inflation, and trimmed its 2022 growth forecast for the pandemic-stricken economy.
The Bank of Thailand (BOT) said it expected inflation to come in above target this year before returning to its 1 to 3 per cent target range next year.
The BOT's monetary policy committee unanimously voted to hold the 1-day repurchase rate at 0.50 per cent, where it has been since May 2020, for a 15th straight meeting, as predicted by all 22 economists polled by Reuters.
"The Thai economic recovery will remain intact in 2022 and 2023, despite impacts from sanctions against Russia which led to higher energy and commodity prices, and a slowdown in external demand," it said in a statement after its policy meeting.
While sanctions on Russia have increased the costs of goods, they will not derail the overall recovery path, it said, adding it would focus on supporting the recovery.
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As supply-driven inflation is seen as temporary, policy adjustments should be discussed when the economy grows at its potential, which is expected at least late next year, Monetary Policy Committee secretary Piti Disyatat told a news conference.
"The key rate is a blunt instrument, so we have to weigh that well before adjusting it," he said.
Economists say policy tightening is unlikely soon because the recovery remains fragile, with the vital tourism industry still struggling.
Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said he expected the rate to stay on hold for the rest of the year until "there are clear signs of a pickup in demand, especially from a recovery in tourism".
The BOT lowered its 2022 economic growth forecast to 3.2 per cent from the 3.4 per cent predicted in December, but raised its headline inflation forecast to 4.9 per cent from 1.7 per cent seen previously. It now predicts inflation will slow to 1.7 per cent in 2023.
The central bank lowered its economic growth forecast for 2023 to 4.4 per cent from 4.7 per cent.
South-east Asia's second-largest economy grew 1.6 per cent last year, which was among the lowest growth rates in the region, after a 6.2 per cent contraction in 2020.
On Monday, Finance Minister Arkhom Termpittayapaisith told Reuters interest rates should stay low to support the recovery.
The BOT maintained its forecast for foreign tourists at 5.6 million this year, after around 428,000 actual visits in 2021.
That compared with 40 million foreign tourists in pre-pandemic 2019, when their spending accounted for 11 per cent of gross domestic product.
The BOT raised its 2022 forecast for export growth to 7.0 per cent from 3.5 per cent seen earlier. It predicted exports would rise 1.5 per cent next year, with foreign tourists seen at 19 million. REUTERS
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