November 30, 2023
BANGKOK – The Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) on Wednesday voted unanimously to retain the policy interest rate at 2.5% per annum.
The overall Thai economy continues to see the recovery trend persist, although the export and production sectors are slowing down, according to Piti Disyatat, secretary of the MPC. However, in 2024 and 2025, the economy is forecast to expand more steadily due to domestic demand, tourism, and the export sector’s recovery.
The MPC sees the inflation rate rising in 2024 in line with the economic recovery and supply-side pressures from global phenomenon such as El Niño.
The committee assessed that the current policy interest rate aligns well with the context of the economy gradually returning to its potential level, Piti said. It allows inflation to remain within the target range, reinforcing financial stability in the long term and mitigating financial imbalances. Additionally, it maintains the monetary policy’s capability to address uncertainties in the near future, hence the decision to maintain the policy interest rate in this meeting, he added.
The Thai economy is projected to grow by 2.4% this year and 3.2% in 2024. When considering the impact of the digital wallet project, the growth rate in 2024 is expected to be around 3.8%, lower than the earlier estimate of 4.4%.
Overall, the Thai economy continues to recover, buoyed by private consumption expansion, particularly in service spending, along with improved employment and income, Piti said.
While the recovery of the export and tourism sectors was slower than anticipated, partly due to the Chinese economy and the ongoing global electronics cycle, the Thai economy was trending towards a more balanced expansion in the future, Piti said. The risks lie in the potential non-beneficial impact of the global economic recovery, influenced by structural changes.
General inflation rates are within the target range and are expected to be 1.3% this year and 2.0% in 2024. When including the digital wallet project’s effects, general inflation in 2024 is forecast at 2.2%, down from the previous estimate of 2.6%. For this year, general inflation has decreased from the higher base of the previous year, mainly due to temporary factors, particularly the energy subsidy and lower fresh food prices, Piti said.
The basic inflation rate, not taking into account the impact of the government’s digital wallet scheme, is predicted at 1.3% this year and 1.2% in 2024. Monitoring the risks from potential increases in food prices due to El Niño and uncertainties in the Middle East conflict affecting global energy prices remains essential, the MPC said.
Overall, the financial system maintains stability, with commercial banks having strong reserves and funds. However, close attention to the development of loan quality, especially SMEs’ debt repayment abilities, and some households’ vulnerability due to higher debt burden and slow income recovery, was necessary, according to the MPC.
The committee supports continual measures to structurally adjust debt, along with targeted measures and sustainable debt solution pathways for vulnerable groups, emphasising responsible lending, Piti said.