The Bank of Thailand is likely to upgrade its economic growth forecast for this year at the policy rate meeting on March 28 after the economy fared better than expected, its chief says.
Several economic readings, particularly in exports and tourism, have exceeded expectations, and the pickup has become more broad-based, said central bank governor Veerathai Santiprabhob.
The Bank of Thailand's Monetary Policy Committee normally reviews its economic growth projection on a quarterly basis, and the upcoming meeting to decide on the policy rate and review the growth forecast is scheduled for March 28.
At the rate-setting meeting in December, the central bank raised its economic growth estimate to 3.9% this year from 3.8%. That figure falls in the range forecast by the National Economic and Social Development Board of 3.6-4.6% but is below the Fiscal Policy Office's projection of 4.2%.
Despite the brighter economic outlook and many global interest rates rising, monetary policy will remain accommodative, Mr Veerathai said. The country's rate decision will be largely based on internal factors, he said.
Against the backdrop of improving economic momentum, there are structural problems in several microeconomic areas, and some sectors have not benefited from the pickup. A key challenge is dealing with pressure from the Thai economic expansion in the longer term, Mr Veerathai said.
Structural labour problems are a key microeconomic challenge dampening the country's GDP growth, along with household debt and weak purchasing power and domestic consumption, Mr Veerathai said.
Although Thailand's unemployment rate has been low over the past several years, the labour structure has changed substantially. Labour in the manufacturing sector has moved to the service sector, especially hotels, restaurants and commerce, but these jobs have not been upgrades, the central bank chief said.
For instance, the electronics industry shows signs of improvement as exports grow, supported by a clear expansion of major economies. But the employment rate in the business sector remains unchanged because of a dearth of skilled labour, while non-skilled labour is being replaced by machines and robots.
In another development, Mr Veerathai said the US dollar's retreat is strengthening other currencies, including the baht.
Uncertainties in the US situation will increase volatility in capital movement around the world, including interest rates, foreign exchange rates and asset prices, he said.
The baht hit a high of more than four years, gaining 4.7% against the greenback this year. It's the second-best performing currency in Asia after the yen, which is up 6.4%.
"We need to periodically manage the baht to curb its strength, and this can involve higher international reserves," Mr Veerathai said. With higher volatility, business operators should protect themselves by hedging against foreign exchange risks, he said.