The economy will continue to recover, driven by improving local demand and foreign tourist numbers, as recent negative shocks have had a limited impact on recovery, according to minutes of the Bank of Thailand (BoT)'s last policy meeting.
Downside risks to short-term growth increased, however, as there could be prolonged shortages of some raw materials while households and businesses could be affected by higher costs, the minutes released on Tuesday said.
On March 30, the BoT's Monetary Policy Committee unanimously voted to leave the benchmark interest rate at a record low of 0.50%, where it has been since May 2020, maintaining support for growth. Its next policy review is in June, and most economists expect no policy change through this year.
The BoT forecasts economic growth of 3.2% this year and 4.4% next year, with foreign tourists at 5.6 million and 19 million, respectively. It predicted inflation at 4.9% this year, exceeding its target range of 1-3%, before slowing to 1.7% next year.
Medium-term inflation expectations remained within the target range while inflation pass-through to wage was assessed to be limited due to a fragile recovery in the labour market and an uneven recovery across industries, the minutes said.
"Employment remained lower than the pre-pandemic level and might recover more slowly than in past crises," they said.
While the committee continued to focus on growth, it should reassess the balance of risks in the period ahead "when the robust economic recovery resumed and the associated risks subsided", the minutes said.
On future policy tightening, Governor Sethaput Suthiwartnarueput told Reuters on Monday the BoT would watch for signs of "deviation from the expected recovery" such as second-round effects on prices and unanchored inflation expectations.