Bank of Thailand sees economic stability from Q3

The Bank of Thailand (BOT) expects the economy to start stabilising from the third quarter thanks to accelerated growth and potential to meet the 2.6% expansion target this year.

Senior BOT executives voiced these optimistic views at the second Monetary Policy Forum for this year on Wednesday.

At the forum, the central bank executives also reiterated that the current benchmark interest rate of 2.5% per annum was suitable for current economic conditions, despite the government’s repeated calls for a cut by at least 25 percentage points.

Piti Disyatat, assistant BOT governor of the Monetary Policy Group, said unlike the economic slowdown late last year, the first and second quarters of this year have seen accelerated recovery.

This recovery will help the economy stabilise to quality growth from the third quarter to early next year.

The third quarter should see stable growth from several dimensions, including expansion, inflation and finances, he added.

Piti said BOT’s Monetary Policy Committee expected the economy to enjoy continual growth, though the rate will not be very high as there are several factors slowing down growth, such as fundamental factors and distribution of income.

Speaking at the same forum, Pranee Sutthasri, senior director of the BOT’s Macro Economy Group, said Thailand should achieve 2.6% growth this year thanks to rising domestic demand and tourism revenue.

Moreover, she said, the manufacturing and export sectors have started to rebound, adding that several engines for growth will start stabilising, including government spending and exports.

“Thailand’s economy is expected to gradually improve in the second, third and fourth quarters,” Pranee said.

All in all, she added, the MPC expects Thailand’s economic risks to reduce this year due to rising consumption, private sector investments and sped-up disbursement of government budget from the second quarter.

She also quoted the MPC as saying that the policy rate of 2.5% per annum is still suitable for the current economic state, adding that the current rate will help reduce risks to the long term economic stability.

Surat Thaenboon, senior director of BOT’s financial policy group, said the central bank’s inflation framework of 1-3% was working efficiently to keep inflation in line with the Thai economic situation.

He said it would be too risky to raise the inflation framework too high as proposed by the government.

He also said the interest rate cannot be used as a tool to solve high household debts, but admitted that the interest rate could be a factor to help reduce the debts.

“We don’t consider the monetary policy as a tool for solving household debts, and don’t set policy rates to try and lower the household debt ratio,” Surat said.

Besides, he said, the BOT has been working to prevent household debts from worsening and has devised some measures to take care of some vulnerable groups with high household debts.