Thai central bank raises key interest rate, trims growth outlook
2023.03.29 03:53
© Reuters. FILE PHOTO: Thailand’s central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva
By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) -Thailand’s central bank raised its key interest rate by 25 basis points for a fifth straight meeting on Wednesday, as it attempts to bring inflation back within target while its economic recovery gathers steam against rising global headwinds.
The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to raise the one-day repurchase rate to 1.75%, as widely expected in a Reuters poll.
The central bank cut its headline inflation forecast for 2023 to 2.9% from 3.0%, and expected it to return to within target in the middle of this year.
The BOT projected economic growth of 3.6% this year and 3.8% next year, compared with previous forecasts of 3.7% and 3.9%, respectively.
It said persistently high inflation remained a risk and the baht currency was highly volatile and global economic uncertainty had increased. Thailand’s financial systems were resilient, it added.
“The committee thus decided to increase the policy interest rate to normalise the monetary policy stance in a gradual and measured manner toward a level consistent with long-term sustainable growth,” the BOT said in a statement.
It said the committee was ready to adjust the size and timing of rate changes should the growth and inflation outlook shift.
With Wednesday’s move, the BOT has raised its key rate by a total of 125 basis points since August, less aggressive than many of its regional peers.
Headline inflation had dropped to a 13-month low of 3.79% in February, but was still above the BOT’s target range of 1% to 3%.
Southeast Asia’s second-largest economy expanded just 2.6% last year, when its tourism sector had just started to rebound.
The central bank forecast foreign tourist arrivals of 28 million this year and 35 million in 2024, up from previous forecasts of 25.5 million and 34 million, respectively.
In pre-pandemic 2019, Thailand received a record of nearly 40 million visitors who spent 1.91 trillion baht ($55.77 billion).
The central bank forecast exports, also a key driver of growth, to contract 0.7% this year and to grow 4.3% in 2024. It had previously forecast export growth of 1.0% in 2023 and 2.6% in 2024.
“The Thai economy should continue to expand, driven mainly by tourism and private consumption,” the BOT said.
“Exports of goods are recovering and expected to gain strength in the second half of this year. However, the global economic uncertainty has increased, in part from persistent inflationary pressures and episodes of banking stresses in advanced economies.”
