By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s economy will continue to recover this year and in 2023 and gradual, measured interest rate hikes remain appropriate though the policy can be adjusted if the outlook shifts from forecasts, the central bank said on Monday.
Southeast Asia’s second-largest economy is expected to grow 3.3% this year and 3.8% next year, driven by a rebound in tourism and increased private consumption, Bank of Thailand said in a statement for an analysts’ meeting.
The economy should return to its pre-pandemic levels late this year or early next, the BOT has said, lagging neighbours as tourism has only started to recover.
Last year’s economic growth of 1.5% was among the slowest in the region.
Monetary policy will ensure a continued economic recovery, Assistant Governor Piti Disyatat told the meeting.
“We don’t want to slow down the economy.
Inflation is largely supply-driven, not demand… The economy is still far from its potential level,” he said.
Last month, the BOT raised its key interest rate by a quarter point to 1.00%, to contain inflation.
It will next review policy on Nov. 30, when economists expect another hike.
The BOT can’t determine the final level of the key rate, but the current level is not neutral yet, Piti said, adding a neutral rate level is expected when the economy was growing at potential, which is expected to take a year or so.
A weak baht remained in line with regional peers and Thailand’s economic fundamentals, Piti said.
The baht, which hovered at a 16-year low against the dollar, had not affected the overall economy and capital flows, he said.
Thailand’s strong external stability could withstand foreign exchange volatility, Piti said.
Headline inflation should gradually fall later this year while the core rate should peak in the current quarter, senior director Surach Tanboon said.
Thailand’s current account deficit is not a big worry and should turn into a surplus next year, helped by tourism, senior director Sakkapop Panyanukul said.
The BOT predicts 9.5 million foreign tourist arrivals this year and 21 million next year.
That compare with 428,000 foreign visitors last year and nearly 40 million in pre-pandemic 2019.
(Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Ed Davies)
