The Bank of Thailand estimates the global economy will slow down next year, but not dip into recession amid attempts by central banks worldwide to contain higher inflation rates.
The central bank's assistant governor for monetary policy group, Piti Disyatat, said in an analyst meeting on Monday the global economy is expected to show clearer signs of a slowdown in 2023, led by key Western economies, especially the US and Europe, which are suffering from rising inflation rates and the Russia-Ukraine war.
The bank forecasts Europe's GDP growth rate this year will be 2.8% before dipping to 1.8% next year.
However, an Asian economic recovery from the impact of the pandemic would support the global economy next year, led by China, according to the Bank of Thailand. The mainland's GDP growth rate should be 4-5%, while the growth rate for Asia excluding Japan is expected to be steady for both 2022 and 2023, said Mr Piti.
Central banks worldwide are trying to tame persistently high inflation. Based on data, the Bank of Thailand does not think the US nor the global economy will enter a recession, despite a projected slowdown in economic growth next year.
Local analysts have been concerned that if the US enters a recession, it could affect the Thai economy.
The Thai economy has been gradually accelerating, with the Bank of Thailand forecasting growth of 3.3% this year, then rising near the economy's potential growth rate in 2023, posting 4.2%.
Given a gradual rebound of the Thai economy amid a higher inflation rate both locally and globally, the central bank's Monetary Policy Committee (MPC) needs to normalise monetary policy to contain higher inflation and support the country's smooth economic recovery, Mr Piti said.
He said the MPC does not need to hold a special meeting to consider a policy rate move, despite the recent hawkish rate hike by the US Federal Reserve. A period of 6-8 weeks to collect economic data before the scheduled MPC meeting is suitable, said Mr Piti, with three remaining MPC meetings scheduled for this year.
Containing the higher inflation rate is the central bank's top priority, he said. Higher inflation will dampen the economic recovery and growth rate for the longer term, said Mr Piti.
The MPC's monetary policy can be an instrument to manage foreign capital flow and the volatility of the foreign exchange rate, he said. On a year-to-date basis, the baht has weakened by 4.9% versus the US dollar, in line with regional currencies.
Mr Piti said the central bank believes the Thai economic recovery should be clearer in the second half this year. Inflation rates everywhere, including Thailand, are expected to peak in the third quarter, then decline, he said. The baht could strengthen against the dollar after this pressure eases, said Mr Piti.