Published on : Tuesday, February 8, 2022
Thailand’s central bank will wait for at least a year before increasing interest rates from record lows for supporting the tourism-dependent economy, which has been affected hard by coronavirus-related travel restrictions.
Economic growth in the Southeast Asian nation is yet to come back to pre-pandemic levels and the recovery continues to be insubstantial due to an outbreak of the Omicron variant that further crippled the crucial tourism industry.
Although inflation breached the Bank of Thailand’s (BOT) target range of 1-3per cent in January, it was expected to fall back within that range in the coming months, thereby giving the central bank the space to maintain an accommodative positionfor reviving growth.
The central bank was expected to increase its key interest rate to 0.75 per cent in the second quarter of 2023, followed by another 25 basis points in the December quarter of next year.
“The Bank of Thailand’s interest rate lift-off would likely only take place in early 2023 when Thailand’s real GDP returns to pre-COVID levels, assuming inflation and impact from US interest rate normalisation remain manageable,” said Chua Han Teng, an economist at DBS.
The Thai baht was expected to be one of the best performers among emerging market currencies, going up byalmost 3 per cent to 32.07 baht/US$1 in a year.
Inflation was expected to average 1.5 per cent this year and slip to 1.2 per cent in 2023. Thailand’s economy was expected to grow 3.9 per cent this year and 4.1 per cent in 2023.
“While there is a risk of higher inflation, we believe the inflation problem remains transitory for Thailand,” said LattakitLapudomkarn, an economist at KiatnakinPhatra Securities.
Tags: Thailand’s central bank