BANGKOK: Thailand’s central bank will likely leave its policy rate unchanged near record lows this week, as policymakers turn their focus to fiscal spending to support weak economic growth.
Bank of Thailand (BoT) governor Veerathai Santiprabhob told Reuters last month that monetary policy would remain “accommodative” as the economic recovery was fragile and inflation was not a big concern.
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Thailand’s ruling junta has ramped up infrastructure projects and approved an extra budget of US$5.4 billion to help revive growth in South-East Asia’s second-largest economy, which has lagged its peers. Exports and domestic demand remain sluggish.
All 23 economists polled by Reuters forecast the central bank’s one-day repurchase rate would be kept at 1.50%, where it has been since April 2015, when its monetary policy committee meets on Wednesday, its first review of the year. The rate is just a quarter-point above the all-time low reached in 2009, following the global financial crisis.
Thailand’s export downturn may be bottoming out after customs-cleared shipments grew in 2016, ending three years of contraction, but the economy faces rising global risks. The central bank governor warned of heightened global risks with the United States taking a more protectionist line under President Donald Trump. But he said Thailand had good buffers with high foreign reserves and low levels of foreign holdings of Thai bonds.
“When there is a plethora of uncertainty, the best thing is to wait to better assess an appropriate set of policies,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
“It’s like driving into fog, you need to exercise caution.” Gundy Cahyadi, economist of DBS Bank in Singapore, said he expected the BoT to maintain its accommodative policy for “as long as the growth recovery remains tentative.”
Most analysts predict no policy change throughout 2017, but some see a rate hike, with one feeling it could come as early as the second quarter to curb climbing inflation and stem fund outflows in response to higher US interest rates.
“We expect the BoT to consider normalising policy from Q4,” said Usara Wilaipich, economist of Standard Chartered Bank, who forecast headline inflation at 1.8% this year.
Annual consumer prices in January rose 1.55%, the fastest in over two years, but still inside the BoT’s target range of 1%-4%. In December, the Monetary Policy Committee unanimously voted to hold the policy rate and kept its GDP growth projection at 3.2% for 2017 and 2016. Official 2016 GDP data is due on Feb 20.
