MPC ups GDP growth forecast, keeps policy rate
THE BANK of Thailand’s Monetary Policy Committee (MPC) revised up its forecast for this year’s economic growth to 3.4 per cent based on a further recovery of merchandise exports, while leaving the benchmark interest rate unchanged at 1.50 per cent at its meeting yesterday.
Jaturong Jantarangs, secretary to the MPC and BOT assistant governor, said gross domestic product was expected to grow at a faster pace than the previous assessment of 3.2 per cent as a result of a more pronounced recovery in goods exports.
The MPC also forecast GDP growth of 3.6 per cent next year.
The export-growth forecast is moved up to 2.1 per cent for this year, compared with the previous estimate of 0.6 per cent. This year’s estimated expansion in the value of merchandise exports is revised up to 2.2 per cent from the earlier prediction of flat growth.
Despite the improved GDP growth outlook, the MPC members yesterday voted unanimously to keep the policy rate on hold to remain accommodative to growth because of many risks, particularly from external uncertainties.
“The MPC took the view that monetary policy should remain accommodative, and would stand ready to utilise an appropriate mix of available policy tools in order to ensure that monetary conditions are conducive to the continuation of economic growth, while ensuring financial stability,” Jaturong said.
Meanwhile, the central bank is closely monitoring the risks extending from US economic and trade policies, concerns over Chinese financial stability, European political developments and problems in Europe’s banking sector.
Thailand’s headline inflation this year is now forecast at 1.2 per cent, down from the earlier estimate of 1.5 per cent, due to the lower-than-expected outturn and oil price. Core inflation, which excludes fresh food and fuel, is also forecast to be slightly lower, at 0.7 per cent, down from the previous projection of 0.8 per cent.
Thailand’s overall financial conditions remain accommodative and conducive to economic growth with sufficient liquidity in the financial system and low real interest rates, the MPC believes. However, the baht has appreciated against its major trading partners’ currencies, which might not be as helpful to the economy as it could be.The MPC took the view that exchange rates might have higher volatility in the period ahead because of external uncertainties.
There remain pockets of risks that need close monitoring such as the deterioration in loan quality of some business sectors, and the search-for-yield behaviour in the prolonged low-interest-rate environment, which might lead to the underpricing of risks, Jaturong said.
