BANGKOK —-Thailand’s central bank left its key interest rate unchanged on Wednesday as expected, ending a year-long tightening cycle amid a slowing economy and below-target inflation, while cutting its growth outlook.
The central bank said the current rate of 2.50 per cent was suitable to support the expansion of Southeast Asia’s second-largest economy, which grew 1.5 per cent in the third quarter, its slowest pace this year, on weak export demand and government spending.
The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to hold the one-day repurchase rate at 2.50 per cent, the highest in a decade.
It had hiked the rate by 200 basis points since August last year to curb inflation.
The baht was largely unchanged after the announcement.
“The committee expects the Thai economy to gradually recover toward its potential, and inflation to be within the target range,” it said in a statement.
“The current policy interest rate is appropriate for supporting long-term sustainable growth,” it said, while ensuring sufficient policy space “in light of an uncertain outlook”.
All 28 economists in a Reuters poll had predicted the BOT would hold the rate on Wednesday, with median forecasts showing no policy change until at least July 2025.
The Bank of Thailand reduced its 2023 economic growth forecast to 2.4 per cent from 2.8 per cent seen earlier, and cut its 2024 growth outlook to 3.2 per cent from 4.4 per cent. The economy expanded 2.6 per cent last year.
The latest 2024 forecast did not factor in the impact of the government’s controversial 500 billion baht ($14.3 billion) digital handout policy to be implemented next year.
It said it saw growth of 3.8 per cent next year if it factors in the signature policy, which will see 50 million people given handouts of 10,000 baht (US$288.27) each to spend in their localities.
Last week, Prime Minister Srettha Thavisin said the economy was in “crisis”, stressing the need to forge ahead with the handout policy.
The Bank of Thailand now expects foreign visitor arrivals at 28.3 million this year verses 28.5 million seen earlier, and 34.5 million next year, verses 35 million seen earlier.
Pre-pandemic 2019 saw a record of nearly 40 million foreign tourists, whose spending accounted for more than 11 per cent of the country’s gross domestic product.
The central bank expects exports, a key driver of Thailand’s growth, will fall 1.5 per cent this year but will increase 4.3 per cent next year, versus a previous projection of a 1.7 per cent drop and a 4.2 per cent rise.
It predicts headline inflation at 1.3 per cent this year, versus 1.6 per cent projected earlier, while 2024 inflation was seen at 2.0 per cent, compared with 2.6 per cent projected earlier. The Bank of Thailand targets headline inflation in a range of 1 per cent to 3 per cent.
— Reuters
