Thailand may skirt global monetary tightening until 2019

Thailand may skirt global monetary tightening until 2019

Finance Ministry spokeswoman Kulaya Tantitemit poses for photos at the ministry. (Photo by Pornprom Satrabhaya)
Finance Ministry spokeswoman Kulaya Tantitemit poses for photos at the ministry. (Photo by Pornprom Satrabhaya)

Thailand is becoming an oasis of monetary policy stability as other emerging markets scramble to raise interest rates.

The Finance Ministry anticipates that borrowing costs will be left at 1.5% this year, said Kulaya Tantitemit, a spokeswoman and an inspector general at the ministry. While an increase is possible in 2019, it won’t be steep, she said.

“It wouldn’t be aggressive,” Ms Kulaya said in an interview on Wednesday, referring to a potential tightening next year. “We still have high liquidity in Thailand.”

A wave of monetary tightening has swept across emerging markets as officials try to stem an investor exodus amid a strengthening US dollar and rising Treasury yields. Thailand, in contrast, has seen its currency appreciate in 2018 and received some of the heaviest net bond inflows in Asia this month.

Its resilience can be traced to strong buffers: more than US$200 billion of foreign reserves and a current-account surplus that few peers can match. That gives policy makers breathing room, with the Bank of Thailand last month saying it doesn’t feel pressure to join global tightening.

BoT governor Veerathai Santiprabhob said on Tuesday the nation has to keep an eye on global interest rates, including in the United States, but that a strong external position provides a policy buffer.

The majority of economists surveyed by Bloomberg in May and June predict no rate increase this year. In fact, some directors at the International Monetary Fund even see the need for monetary easing to steer inflation back to target.

The ministry forecasts average inflation of 1.4% this year, compared to the central bank’s target range of 1% to 4%.

Stronger growth

Southeast Asia’s second-largest economy is expanding robustly on exports and tourism, and the ministry is set to revise up its growth outlook to 4.5% for 2018 from the current 4.2%, Ms Kulaya said. The pace next year should be about the same as the pending revision.

“Economic growth is healthy,” said Ms Kulaya, the former director of the Macroeconomic Policy Bureau in the ministry. “Our challenge is people don’t feel it. People in rural areas, in the agricultural sector, don’t see the economy getting better. Our job is, how will we bring money down to other sectors?”

The military government this year approved a 150 billion baht supplementary budget to help fund programs to reduce poverty, and raised the minimum wage nationwide for the first time in five years.

One challenge for the economy could stem from general elections expected in February next year, in a country with a history of votes followed by coups. The current stretch of military rule is one of the longest since the 1970s.

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