BANGKOK- 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 percent since May 2020 to aid a slow and uneven recovery, the Bank of Thailand (BOT) said in a statement at an analysts’ meeting.
The BOT has forecast economic growth of 3.2 percent this year and 4.4 percent 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 percent to 3 percent, meaning no policy action is needed, for now, officials said.
The BOT forecasts headline inflation at 4.9 percent this year, above its target range, before easing back to 1.7 percent next year.
In the medium-term, the BOT will look to increase its limited policy room when the economy recovers more strongly, Assistant Governor PitiDisyatat 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 US 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.
Thailand’s economic activity in March came under pressure from rising coronavirus infections and higher inflation driven by increasing energy prices, after a recovery in the previous month, the central bank said on Thursday.
Overall business activity was steady in March, while the baht depreciated following an escalation of the Russia-Ukraine conflict, the Bank of Thailand (BOT) said.
Southeast Asia’s second-largest economy should, however, remain on the recovery path, senior BOT director Chayawadee Chai-Anant told a news conference.
The economy in “the first quarter recovered but not strikingly, compared with a very good fourth quarter,” she said, adding the recovery was expected to continue in the second quarter of this year.
The economy grew a faster-than-expected 1.9 percent in the fourth quarter of 2021 from a year earlier.
