Thai central bank lifts 2017 growth forecast a tad, holds key rate

BANGKOK: Thailand’s central bank has turned slightly more optimistic about how fast the country will grow this year while leaving its key interest rate at same low level it has been since April 2015.

As expected, the Bank of Thailand (BoT)’s Monetary Policy Committee yesterday voted unanimously to keep the one-day repurchase rate at 1.5%, a quarter-point above the record low.

The BoT continues to count on government spending to support economic growth, which has lagged regional peers, as South-East Asia’s second-largest economy continues to face global risks and high household debt at home.

Thailand’s military government has ramped up investment to try to lift domestic activity, as pivotal exports are just recovering.

The growth outlook has improved due to better exports “while domestic demand continues to expand at a gradual pace and is not yet sufficiently broad-based,” the MPC said.

But the improved growth outlook is ”still subject to external risks”, it said, citing policies of the United States policies and other factors.

The committee said monetary conditions remained accommodative and conducive to growth with ample financial system liquidity.

It said recent movements in the baht were in line with regional currencies, and the BoT would continue to monitor short-term capital flows.

The baht has gained more than 5% against the dollar this year, making it South-East

Asia’s best performing currency.

All 22 economists polled by Reuters forecast no policy change yesterday, and most who gave a year-end projection saw the BoT holding rates through 2017.

With the economy showing signs of improvement, ”there is no pressing need for the BoT to adjust rates any time soon,” said Capital Economics, adding it expects the benchmark to stay 1.5% ”not just for the rest of 2017 but also 2018”.

The BoT raised its 2017 economic growth forecast to 3.5% from 3.4%. It predicted 3.7% growth in 2018, up from 3.6% seen in March The economy expanded 3.2% last year. The central bank now expects exports to rise 5% this year, rather than 2.2%. “Their projections suggest they take comfort in the recent uptick in exports while flagging caution on the lack of inflation,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.

Exports, traditionally a key growth driver, rose 7% in January-May from a year earlier.

They increased for the first time in four years in 2016, customs data showed.

The central bank cut its 2017 headline inflation forecast to 0.8%, below its 1%-4% target, from 1.2% earlier.

The central expects headline inflation to return to the target band in October-December after consumer prices fell for a second month in June.—