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Thailand central bank awaits tourism revival, to hold rates for another year: Poll

Bengaluru: Thailand’s central bank waits at least a year before raising interest rates from record lows to support tourism-dependent economies hit hard by coronavirus-related travel bans, Reuters says Revealed.

Economic growth in Southeast Asian countries has not yet returned to pre-pandemic levels, and recovery remains fragile due to the outbreak of the Omicron coronavirus variant that has crippled important tourism industries.

Inflation broke the Bank of Thailand’s (BOT) target range of 1-3% in January, but is expected to return to that range in the coming months, leaving the central bank as easing as necessary. There is room to maintain. Revive growth.

This is despite inflation rising for the first time in decades in many countries, including the United States, where the Federal Reserve plans to raise interest rates next month.

The Fed’s tightening cycle in the past has led to capital outflows from developing countries like Thailand, but analysts aren’t too worried this time around.

All 23 Reuters economists unanimously from February 1st to 4th, BOT maintains daily repurchase rate at a record low of 0.50% for the February 9th meeting and the rest of the year I predicted that.

The central bank was expected to raise key interest rates to 0.75% in the second quarter of 2023 and then another 25 basis points in the December quarter of next year.

“The Bank of Thailand’s interest rate hike is likely to occur only in early 2023, assuming that the effects of inflation and normalization of US interest rates remain manageable, and that Thailand’s real GDP will return to pre-COVID levels.” And DBS.

“Monetary policy differences with Thailand’s Federal Reserve Board could increase capital flow volatility, but the BOT is designed to address potential capital flow fluctuations and weak baht. There is enough preparation buffer. “

Indeed, Thai baht is expected to perform best among emerging market currencies, rising nearly 3% in a year to 32.07 baht / US $ 1, another Reuters study shows. I did.

Inflation was expected to average 1.5% this year and 1.2% in 2023, according to another Reuters economist survey released last month. Thailand’s economy was expected to grow 3.9% this year and 4.1% in 2023.

“Although there is a risk of rising inflation, we believe the inflation problem is temporary for Thailand,” said Rattakit Rapdomkan, an economist at Kiatnakin Bank.

“But if inflation proves to be sustainable and expectations take hold, the policy rate should be the primary tool for control.”

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