Thailand’s economy continues to recover, helped by tourism and consumption, though this year’s growth forecast may need to be revised down amid weak exports, according to Bank of Thailand Governor Sethaput Suthiwartnarueput.
Inflation is falling faster than expected and interest-rate decisions will now focus on the economic outlook, not short-term data, Mr Sethaput said at a central bank seminar on Wednesday in Chiang Mai.
However, he has ruled out any rate cuts in the offing as authorities strive to navigate a “smooth landing” for the economy.
“We have changed our language by removing the ‘gradual and measured’ approach. This means we are close to a turning point,” he said, referring to the monetary policy statement after the Aug 2 rate hike.
“Next time, there is a chance that we will hold or raise. But the thing you won’t see is a cut as it’s not the right time to cut.”
The central bank has delivered a total of 175 basis points of increases since August last year that has taken the benchmark rate to 2.25% the highest in nine years, even as headline inflation slowed to below 1% from 7.9% a year ago.
Policymakers are watchful that a tourism revival and sustained economic rebound won’t rekindle price pressures, stressing that they are outlook-driven instead of data-dependent.
The central bank’s Monetary Policy Committee (MPC) will weigh the long-term outlook and settle on a rate that ensures the right balance for the economy, Mr Sethaput said.
At the next MPC meeting on Sept 27, policy makers will also trim their gross domestic product growth forecast of 3.6% for this year in light of sluggish exports, he added.
Southeast Asia’s second-largest economy is still poised to expand more than 3% in 2023 and 2024, from 2.6% last year, despite the current political impasse that will delay approval of the fiscal 2024 budget and state spending.
The central bank’s relatively hawkish stance on interest rates may help support the baht, which has fallen about 2% in August, among the worst performers in Asia.
The baht has turned volatile in recent months as traders assess the delay in forming a government since the May 14 election.
“We don’t want policies that could worsen economic stability,” Mr Sethaput said. The central bank had already factored in two quarters of delay in the budget, he added.
In May, the central bank maintained its forecast for economic growth at 3.6% this year, and 3.8% for 2024.
“Due to a slowdown, this number will probably need to be adjusted down to the mid-3% range this year,” Mr Sethaput said.
The economy expanded by a more-than-expected 2.7% in the first quarter from a year earlier as the vital tourism sector gathered strength.
On July 26, the Ministry of Finance trimmed its 2023 economic growth forecast to 3.5% from 3.6%, lowering its projections for exports and foreign tourist spending.
“Exports have been soft due to global issues,” Mr Sethaput said, adding private consumption and tourism would support continued recovery and that the country expects 29 million foreign arrivals this year.
A record 40 million foreign tourists visited the country in pre-pandemic 2019, spending 1.91 trillion baht.
The country received 15.32 million foreign tourist arrivals from January to July.