The Bank of Thailand (BOT) has reiterated its commitment to maintaining a low policy interest rate while gradually tightening measures to address potential inflation risks. As the Thai economy continues its recovery, the central bank remains cautious in its approach, having raised its main interest rate six times since August to 2% in an effort to rein in inflation. The BOT aims to strike a balance between managing inflationary pressures and ensuring sustained long-term economic growth prospects.
Deputy Governor Mathee Supapongse of the BOT emphasized that despite the series of rate hikes, the current interest rate remains “low and probably the lowest” among Southeast Asian countries. This lower rate is expected to stimulate future investment, providing a favorable environment for businesses. Supapongse reassured that unlike other nations, Thailand will not implement rapid and aggressive rate hikes.
The central bank has outlined a gradual tightening strategy to safeguard the ongoing recovery of Southeast Asia’s second-largest economy, which has been primarily driven by a revival in tourism and private consumption. It has projected a growth rate of 3.6% for the current year and anticipates a further expansion of 3.8% in 2024. Notably, Thailand experienced a 2.6% economic growth in the previous year.
The Bank of Thailand is scheduled to conduct its next review of monetary policy on August 2. While some economists anticipate an additional interest rate hike, others predict a pause due to declining inflation rates. It is essential to closely monitor demand-side pressures and rising costs, particularly as the tourism sector gains momentum, according to Mathee.
Furthermore, Mathee highlighted the potential impact of the policies implemented by the winning parties in the national election held in May. The Move Forward and Pheu Thai parties have formed a coalition government and have pledged significant wage increases, among other initiatives. These policies could contribute to inflationary pressures in the country.
As the Bank of Thailand navigates the delicate task of balancing economic recovery with inflation control, it remains committed to gradually tightening its policy interest rate while ensuring sustained growth and stability for the nation’s economy.