27-9-2023 (BANGKOK) The Bank of Thailand (BOT) raised its key interest rate for the eighth consecutive meeting on Wednesday (Sep 27), despite facing slowing economic growth, below-target inflation, and increasing global uncertainties. The monetary policy committee of the central bank voted to increase the one-day repurchase rate by 25 basis points to 2.50 percent. This brings the total rate hike to 200 basis points since August 2022.
A Reuters poll of 27 economists revealed that only six had predicted a quarter-point increase, while the remaining 21 expected no change in monetary policy. The decision to raise interest rates goes against the majority consensus.
The Bank of Thailand revised its economic growth forecast for 2023, lowering it to 2.8 percent from the earlier projection of 3.6 percent. However, the bank raised its growth outlook for 2024 to 4.4 percent from 3.8 percent. Thailand’s economy experienced a growth rate of 2.6 percent last year.
The country’s second-largest economy expanded by a mere 1.8 percent year-on-year in the April-June quarter, falling short of expectations and showing a decline from the previous quarter. The sluggish growth was attributed to a decline in exports and reduced investments, which offset the positive impact of the tourism sector.
The newly formed Thai government, which assumed office last month, has approved various policies aimed at stimulating the economy. These measures include waiving visa requirements for visitors from China.
The Bank of Thailand now expects foreign arrivals to reach 28.5 million this year and 35 million in 2024. This is slightly lower than the previous forecast of 29 million and 35.5 million, respectively. In 2019, before the pandemic, Thailand welcomed nearly 40 million foreign tourists who contributed more than 11 percent to the country’s GDP through their spending.
Regarding inflation, the central bank projected headline inflation to be 1.6 percent this year, down from the earlier projection of 2.5 percent. However, the bank increased its forecast for 2024 to 2.6 percent from the previous estimate of 2.4 percent. The Bank of Thailand is carefully monitoring inflationary pressures while making adjustments to its forecasts.
