Thailand’s Central Bank Leaves Key Interest Rate Unchanged
The Central Bank has left its key interest rate unchanged at a record low to support the economy as Thailand tries to revive its vital tourism sector.
The Bank of Thailand’s Monetary Policy Committee voted unanimously to hold the rate at 0.50% for its 12th straight meeting. A Reuters poll by 21 economists predicted the central bank would hold its rate.
The key interest rate was cut three times last year by the committee to help alleviate the impact the coronavirus pandemic had on Thailand’s economy.
The Committee also assessed that Thailand’s economy bottomed out in the third quarter of 2021 and entered a recovery phase following the relaxation of containment measures and the re-opening of the country, the Bank of Thailand said in a statement after the committee’s policy meeting.
The Bank of Thailand believes the economy will expand at a pace close to the previous projections for 2021 and 2022 on the back of domestic spending. Furthermore, that the economy will gradually recover following the relaxation of containment measures. Thus partially offsetting the adverse impact of higher global energy prices.
In September, the central bank forecast economic growth of 0.7% this year and 200,000 foreign tourists. Next year, it speculates 3.9% GDP growth and up to 6 million arrivals.
In 2019, prior to covid-19 arriving from China, nearly 40 million foreign visitors came to Thailand and spent 1.91 trillion baht.
Euben Paracuelles, an economist at Nomura Holdings Inc in Singapore expects Thailand’s central bank to keep its policy rate unchanged throughout 2022. Above all because as the Kingdom’s economic recovery may lag because of a slow rebound in tourism despite the reopening.
The Bank of Thailand also said the Thai baht was more volatile and it would closely monitor its developments in both global and domestic financial markets. It would also continue to work on improving structural issues in the foreign exchange system (Forex).
The Thai baht had little change after the key interest rate announcement, holding gains of 0.1% against the greenback and poised for a fourth straight day of advances.
The baht has gained 1.3% so far this month due to rising inflation in the US brought on by a spending spree by the Biden administration.
The Bank of Thailand doesn’t believe the US Federal Reserve will raise rates faster than expected, but it’s ready to handle any impact on the baht, bond yields, and capital flows.
The Monetary Policy Committee will also revise economic forecasts at its next meeting on Dec 22. The committee may raise its inflation forecasts slightly, though the price gains are not significant enough to impact the Bank of Thailand monetary policy.