Bank of Thailand Unanimously Agree to Raise Key Rate, Forecasting 2.8% GDP Growth
The Monetary Policy Committee (MPC) of Thailand has unanimously agreed to raise the key rate immediately. This comes after a previous increase from 2% to 2.25% in August. The MPC has also made predictions about Thailand’s economic growth in the coming years, indicating an expected rise in inflation.
Economic Growth Forecast
The MPC has projected that Thailand’s Gross Domestic Product (GDP) will grow by 2.8% in 2023, with private consumption being a significant contributor to this growth. Furthermore, the GDP growth is expected to increase to 4.4% in 2024 due to a boost in both domestic and foreign demand. This increase in demand is expected to cause a rise in inflation.
Economic Recovery and Inflation
Despite the slowed pace of recovery this year due to reduced foreign demand, the MPC expects Thailand’s economy to continue its recovery. The committee predicts that economic expansion will accelerate in 2024 due to increased domestic and foreign demand, which could also potentially lead to higher inflation. The MPC forecasts that headline inflation will be at 1.6% in 2023 and 2.6% in 2024. The lower rate this year is being attributed to government measures aimed at reducing living costs.
Core inflation is estimated to be 1.4% in 2023 and 2% in 2024. However, the MPC has issued a warning regarding the potential risk of rising core inflation in 2024. This could be due to increased demand resulting from government policies and a potential rise in food prices if the effects of the El Nino phenomenon turn out to be more severe than expected.
Thailand’s Financial System Stability
The MPC has reassured that Thailand’s overall financial system is stable, with commercial banks reporting healthy levels of funds and reserves. However, the committee has advised banks to keep an eye on credit quality due to potential impacts on the debt-repayment abilities of small and medium enterprises and vulnerable households. The MPC has also been encouraging commercial banks to continue offering debt restructuring programmes to customers and to maintain a responsible lending policy.
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