The Bank of Thailand is committed to maintaining a strong monetary policy framework amid heightened uncertainty, especially given expected policies set to be introduced in the US.
At a Monetary Forum hosted by the central bank on Monday, speakers said the tentative policies of US president-elect Donald Trump, including on taxes and tariffs, trade, energy and immigration, are likely to contribute to increased uncertainty in global financial markets, as well as in the global and Chinese economies.
These policies may cause inflation to spike in the US and a prolonged period of high US Federal Reserve policy rates, according to the forum.
Such uncertainty may have both positive and negative effects on the Thai economy. For example, Thailand's exports to China could decelerate, and the country may face heightened competition due to an influx of Chinese goods.
Thailand may benefit from a movement of production bases into the country, although this could be tempered by slower investment due to rising global economic uncertainty, noted the forum.
If China's economy slows because of trade conflict with the US, Thailand's export and tourism sectors could also be affected.
Economists said the Monetary Policy Committee (MPC) needs to monitor the policies introduced by Trump, whose inauguration is scheduled for Jan 20.
Trump is expected to focus on negotiations with relevant parties concerning each of his policies, meaning it is difficult to assess the actual implementation and timeline of the policies, according to the forum.
"The central bank's monetary policy will remain strong, able to address increased uncertainties and the potential for them to evolve into adverse shocks," said Piti Disyatat, a member of the MPC.
Last month, the MPC unanimously voted to maintain its policy rate at 2.25% to support robust policy amidst heightened uncertainties.
The monetary policy stance remains flexible, ready to adjust based on data and the economic outlook, according to the central bank.
The country's economic recovery continues and is nearing potential growth, despite an uneven pace of recovery. Thailand's household debt has declined because of the debt deleveraging process.
The central bank reported the country's household debt-to-GDP ratio was 89% in the third quarter of 2024, easing from 89.6% the previous quarter.
Mr Piti, who is also the central bank's deputy governor for monetary stability, said the regulator does not set a specific household debt-to-GDP ratio.
The regulator focuses primarily on the well-being of the Thai population, including individuals' and households' ability to service debt and the affordability of doing so, rather than the ratio itself.
He said the purpose of loan creation is another crucial factor. In Thailand, mortgages account for around 30% of the country's total household debt, compared with 80-90% on average in developed countries.
The Bank for International Settlements suggests the household debt-to-GDP ratio should not exceed 80%, as exceeding this threshold can negatively impact economic growth and domestic consumption in a country.
As a result of the debt deleveraging process, the banking sector has experienced slower loan growth.
Auto loans in the banking industry are expected to contract in 2024 before rebounding this year. Auto loans contracted by 7.7% year-on-year in the third quarter last year, according to the central bank.