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Bank of Thailand lowers 2023 GDP forecast from 3.6% to 2.8%
The Monetary Policy Committee in Thailand has unanimously voted to raise the policy rate by 0.25 percentage points, bringing it to 2.50 percent.
Key Takeaways
- The Monetary Policy Committee (MPC) of the Bank of Thailand has unanimously decided to raise the policy rate by 0.25 percentage point to 2.50 percent, aiming to sustainably control inflation and ensure long-term macro-financial stability.
- The Thai economy is expected to recover at a slower pace in 2023 due to soft external demand but is projected to pick up in 2024. The Committee has projected a growth rate of 2.8% and 4.4% for the years 2023 and 2024 respectively
- Inflation is projected to increase next year, in line with the economic recovery and El Niño-related supply pressure, while the Committee remains attentive to upside risks stemming from government economic policies and potential food price increases.
The Committee has projected a growth rate of 2.8% and 4.4% for the years 2023 and 2024 respectively. The growth is expected to be driven by private consumption. However, the growth rate for this year has been somewhat subdued due to a delayed recovery in merchandise exports and tourism, which was further weighed down by the subdued growth in China and the global electronic cycle.
Nonetheless, the growth rate is expected to pick up in 2024, mainly due to domestic demand, which would be supported by a steady recovery in tourism and a turnaround in merchandise exports, along with additional support from government policies.
Inflation is expected to stay within the target range with rates of 1.6% and 2.6% in 2023 and 2024 respectively. The government’s subsidies and a high base from the previous year are predicted to keep inflation low for the rest of 2023. However, core inflation is estimated to increase from 1.4% in 2023 to 2% in 2024.
The Committee will monitor the impact of government economic policies on growth and inflation. The overall financial system remains resilient, but there is a need to monitor credit quality for certain SMEs and households.
Financial conditions have tightened somewhat, but continue to support the private sector and economic recovery. The Committee deems the current policy interest rate appropriate for supporting long-term sustainable growth, but will take into account the outlook for growth and inflation, including risks from government economic policies.
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