The Economic Intelligence Center (EIC) at Siam Commercial Bank (SCB) has predicted that the Bank of Thailand (BOT) will implement two interest rate cuts in the first half of this year due to economic challenges faced by Thailand. The EIC foresees the Monetary Policy Committee (MPC) of the BOT reducing the policy rate by 50 basis points in the first half. Chief economist Somprawin Manprasert mentioned that the first rate cut is expected to happen during the MPC meeting on April 10, followed by a further 25 basis points reduction on June 12. These cuts are anticipated to bring the policy rate down to 2% by mid-year from the current 2.5%, aligning with a neutral stance on monetary policy.
This projection by SCB EIC suggests a potential shift in Thailand’s economic landscape in 2024. The expected rate cuts could encourage borrowing and spending, potentially boosting growth in sectors like manufacturing, tourism, and exports. The decline in the policy rate from 2.5% to 2% is likely to move the monetary policy stance towards neutrality.
Manprasert highlighted that factors influencing the Thai economy will be crucial in supporting these rate cuts. The anticipated adjustments should provide the MPC with flexibility to adapt its monetary policy in response to structural changes in the economy, offering relief to businesses and households facing high debt burdens due to elevated interest rates.
These rate reductions are expected to enhance economic sentiment amidst subdued government spending. Predicted stability of the baht against the USD in the short term is also projected, with the baht expected to appreciate against the dollar by year-end. The growth forecast for the Thai economy in 2024 has been revised down to 2.7% from 3%, with challenges such as reduced public spending in Q1 and issues in the manufacturing sector needing attention for a successful recovery this year.
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