BANGKOK (Reuters) – Thailand’s economy will continue to expand in 2022 and 2023 despite rising inflation, while monetary policy tightening may have to wait until the economy recovers more strongly, the central bank said on Monday.
The central bank will continue to support the economy, as it has left the key rate at a record low of 0.50% since May 2020 to aid a slow and uneven recovery, the Bank of Thailand (BOT) said in a statement https://www.bot.or.th/Thai/MonetaryPolicy/MonetPolicyComittee/MPR/DocLib/AnalystMeeting_110422.pdf at an analysts’ meeting.
The BOT has forecast economic growth of 3.2% this year and 4.4% next year, driven by domestic demand and tourism. It predicts 5.6 million foreign tourists this year and 19 million next year, compared with 40 million in 2019.
Despite higher supply-driven inflation, medium-term inflation expectations remain in the BOT’s target range of 1% to 3%, meaning no policy action is needed, for now, officials said.
The BOT forecasts headline inflation at 4.9% this year, above its target range, before easing back to 1.7% next year.
In the medium-term, the BOT will look to increase its limited policy room when the economy recovers more strongly, Assistant Governor Piti Disyatat told a news conference.
“If the economy heats up, it’s natural that monetary policy must be adjusted,” he said.
Southeast Asia’s second-largest economy is expected to return to pre-pandemic levels in early 2023 and to reach its growth potential in the second half of that year, Piti said.
The Thai and U.S. rate differentials have had limited impact on Thailand’s financial markets due to its strong external position, he said.
Last week, Governor Sethaput Suthiwartnarueput told Reuters the BOT would watch for signs such as second-round effects on prices and unanchored inflation expectations before policy tightening.
(Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Martin Petty)
