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Bank of Thailand rules out rate cut in the near future
The Governor of the Central Bank of Thailand, Sethaput Suthiwartnarueput, has ruled out any interest rate cuts in the near future, as the country’s economy continues to recover.
Key Takeaways
- The Bank of Thailand governor has ruled out any interest rate cuts in the near future, signaling a turning point in monetary policy.
- The country’s economic growth forecast for this year may need to be revised down due to weak exports, despite the recovery supported by tourism and consumption.
- The central bank’s focus will now be on the long-term economic outlook and achieving a balance that ensures stability, with the next policy meeting likely to lower the GDP growth forecast for 2023.
Despite weak exports, tourism and consumption have helped support growth, though the growth forecast for this year may need to be revised down. Inflation is falling faster than expected, and the central bank will now base its interest rate decisions on the economic outlook rather than short-term data.
The Monetary Policy Committee will consider the long-term outlook and aim to strike the right balance for the economy. The central bank’s relatively hawkish stance on interest rates may support the baht, which has been one of the worst-performing currencies in Asia.
The governor expects the economy to expand by over 3% in 2023 and 2024, despite the political impasse. However, the growth forecast for this year may need to be adjusted down to the mid-3% range.
Exports have been affected by global issues, but private consumption and tourism are expected to support a continued recovery. The country anticipates 29 million foreign arrivals this year, compared to the record 40 million in 2019. The latest rate hike by the central bank is likely to be the last for now.
Analysis
As the Bank of Thailand governor maintains a cautious stance on interest rates, the country continues to navigate through economic challenges. The weakening exports have been a cause for concern, prompting a potential revision of the growth forecast for this year. However, despite this setback, Thailand has found resilience in its tourism industry and strong domestic consumption.
Inflation, on the other hand, has been falling at a rate exceeding expectations. This unexpected decline has prompted the central bank to shift its focus from short-term data to the long-term economic outlook when making interest rate decisions. By adopting this approach, the bank aims to ensure stability and strike a balance that will benefit the economy in the long run.
While the central bank’s relatively hawkish stance on interest rates may have had a positive impact on the baht, it has also contributed to the currency’s underperformance in comparison to its Asian counterparts. Nevertheless, the governor remains optimistic about the economy, projecting growth of over 3% in 2023 and 2024, despite the ongoing political impasse.
Although Thailand’s export sector has been affected by global issues, the country relies on the resilience of private consumption and the continued support of tourism to sustain its recovery. Anticipating a lower number of foreign arrivals this year compared to the record-breaking figures of 2019, the country expects approximately 29 million visitors to help bolster its economy.
It is important to note that the recent rate hike by the central bank is likely to be the last for the time being. With an emphasis on the long-term economic outlook and a commitment to stability, the Bank of Thailand is carefully navigating the challenges ahead to ensure the country’s continued growth and prosperity.
Overall, while Thailand’s economy continues to face obstacles and uncertainties, it has shown resilience and adaptability. By striking a balance between addressing immediate concerns and planning for the future, the country remains optimistic about its path to recovery and sustained economic growth.
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