Thailand’s economic rebound is gradual and has not yet reached its full potential, but according to Bank of Thailand governor Sethaput Suthiwartnarueput, there is presently no requirement to lower interest rates.
Despite lower inflation levels, product prices continue to remain elevated, Mr. Sethaput conveyed during a recent news conference.
In May, the Consumer Price Index increased by 1.54% year-on-year, marking the highest growth in 13 months, and this upward trend is expected to persist slowly through June following a 0.6% rise in April.
Mr. Sethaput explained that the existing interest rate is still deemed appropriate for supporting economic recovery while ensuring that inflation expectations remain anchored within the target range. When questioned about the reluctance to cut rates despite decreasing inflation, he emphasized the stability of the current rate.
Over the past few months, there has been a divergence between the government and the central bank regarding interest rate adjustments, with Prime Minister Srettha Thavisin advocating for a rate reduction to stimulate Thailand’s economy, the second-largest in Southeast Asia.
In the previous month, the Bank of Thailand maintained its key interest rate at 2.50%, the highest level in more than ten years, citing its alignment with economic conditions and inflation levels.
The next interest rate assessment is scheduled for August 21.
Although the economy exceeded expectations with a 1.5% growth in the first quarter of the year, it decelerated from the 1.7% expansion in the preceding quarter.
The central bank has projected economic growth of 2.6% for this year and 3% for the next year, falling behind regional counterparts following last year’s 1.9% expansion.
In a recent update, the central bank anticipated the economy to operate at its potential growth rate by late 2024 or early 2025.
Mr. Sethaput indicated a potential growth rate of approximately 3% in the 2023-2028 timeframe, down from the earlier range of 3% to 3.5% prior to the pandemic.
Meanwhile, the Bank of Thailand anticipates headline inflation to remain below the targeted range in the third quarter before reentering the range in the fourth quarter.
Year-to-date, the annual headline inflation rate stood at just 0.13% in the first five months of 2024. The central bank’s forecasts indicate an average headline inflation rate of 0.6% for this year and 1.3% for the following year.
