The Bank of Thailand believes the economy bottomed out in the third quarter and should gradually pick up from the fourth quarter thanks to progress in the vaccination rollout and earlier than expected relaxation of the government's containment measures.
Lockdown measures to contain the Delta variant took a toll on the economy, with weaker economic activities in the third quarter, said Titanun Mallikamas, secretary of the Monetary Policy Committee (MPC).
However, the government's progress on vaccine disbursement and eased containment measures should support the economy in the period ahead, said Mr Titanun.
"Yet uncertainties surrounding the economic outlook remain high until next year," he said.
As a result, the MPC meeting on Wednesday voted unanimously to maintain the policy rate at the existing level of 0.5%.
The committee believes the economy in 2021 and 2022 will expand close to the projections from its previous meeting, amid high uncertainties.
The most important issue for the economy is the implementation of public health measures that would help facilitate economic and income recovery, said Mr Titanun.
He said the central bank maintained GDP growth projections for 2021 and 2022 at the existing levels of 0.7% and 3.9%, respectively.
Although the economy in the third quarter was affected by the containment measures and a slowdown in exports, significant progress on vaccination and unexpected easing of lockdown measures should help restore private sector confidence and increase private consumption for the rest of 2021, said the MPC.
The central bank adjusted some economic data, raising private consumption for next year to 5.7% growth, up from 3.4%.
The committee also downgraded private consumption this year to zero from a 2.5% expansion forecast earlier.
The economy in 2022 should gradually recover, mainly thanks to domestic spending in tandem with improving confidence, said Mr Titanun.
However, foreign tourist arrivals were expected to recover slowly, with the figure for this year slashed from 700,000 to 200,000.
Arrivals for 2022 were cut from 10 million to 6 million.
The central bank also adjusted the current account deficit for 2021 from an earlier forecast of US$1.5 billion to $15.3 billion.
In addition, the MPC views government measures and policy coordination among state agencies as critical to support the economic recovery.
Public health measures should strike a balance between containing the outbreak and supporting the recovery of economic activities and income, said the committee.
Fiscal measures should help facilitate economic recovery by focusing on generating income and preparing measures to raise potential growth. Monetary policy must contribute to continued accommodative financial conditions overall, said the MPC. Financial and credit measures should be expedited to distribute liquidity to affected groups in a targeted manner, helping to reduce the debt burden.